* Volatility in ferrous futures affecting physical prices
* Even as seasonal steel demand in China is picking up
By Manolo Serapio Jr
MANILA, March 22 Chinese steel and iron ore
futures fell sharply for a second straight session on Wednesday
as investors continued to cash in on recent gains even as the
outlook in the physical market was supported by a seasonal
pickup in demand.
The losses in both commodity futures came after they posted
their largest weekly increases in two months last week, and
traders say the wild swings in the futures market have
unnecessarily swayed the physical market.
As futures slid, spot iron ore on Tuesday tumbled more than
4 percent, its steepest single-day drop in more than three
"A lot of speculative players in the paper market create
volatility in the price and this volatility has affected the
physical market," said an iron ore trader in Shanghai.
"Fundamentals have not changed so much. Seasonal demand is
still happening because the temperature in most areas in China
is warm enough for construction projects to proceed."
The most-active rebar on the Shanghai Futures Exchange
was down 3.8 percent at 3,147 yuan ($457) a tonne by
Iron ore on the Dalian Commodity Exchange slipped
3.4 percent to 672.50 yuan per tonne.
Earlier in the session, both commodities touched their
lowest since March 13.
But Morgan Stanley said declining inventory at both Chinese
traders and mills "suggest rising demand".
Steel stocks at traders dropped 2.5 percent as of March 17
from the previous week, while those at major mills dived 8.3
percent on Feb. 28 from Feb. 20 onwards, Morgan Stanley stated
in a report.
Further weakness in futures could drag down spot iron ore
prices again as prospective buyers pare down bids for physical
cargoes, traders said.
Iron ore for delivery to China's Qingdao port .IO62-CNO=MB
slid 4.3 percent to $87.59 a tonne on Tuesday, the lowest since
March 10, according to Metal Bulletin.
It marked the steepest single-day drop for the spot
benchmark since December 2016.
($1 = 6.8861 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Sherry