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Iron ore, steel slide in China as post-rally reluctance reigns
March 9, 2016 / 4:07 AM / 2 years ago

Iron ore, steel slide in China as post-rally reluctance reigns

* Dalian iron ore drops nearly 3 pct, Singapore ore down 6
pct
    * Shanghai rebar fell as much as 5.2 pct

    By Manolo Serapio Jr
    MANILA, March 9 (Reuters) - Steel and iron ore futures in
China slumped on Wednesday as investors cashed in on the recent
rapid rise to multi-month highs that many thought was largely
driven by speculative buying with no marked changes in
supply-demand fundamentals.
    Iron ore futures in Singapore also extended losses to a
second session, with the most-active contract sliding nearly 6
percent.
    A rally in Chinese steel prices fueled a 20-percent spike in
the price of spot iron ore on Monday, its biggest single-day
jump on record.    
    "The rally was largely distorted away from fundamentals
which have slightly improved compared with end-2015 but not
enough to support the rapid hike in prices," said Zhao Chaoyue,
analyst with Merchant Futures in Shenzhen.
    "I understand that end-users including house appliance and
auto producers have already restocked by the end of last year
and the pace of buying is slowing at the moment while demand
from the property sector hasn't picked up yet," Zhao said on
steel usage in top consuming market China.
    Rebar, a construction steel product, fell as far as 2,035
yuan ($312) a tonne on the Shanghai Futures Exchange 
and was down 3.5 percent at 2,071 yuan by midday. 
    On the Dalian Commodity Exchange, the most-traded May iron
ore fell 2.6 percent to 410.50 yuan a tonne. May iron
ore on the Singapore Exchange dropped 5.5 percent to
$50.24 per tonne.
    Investment bank ANZ said the weakness in steel and iron ore
futures "will only add to the market's reluctance to buy into
the sustainability of iron ore prices above $60".
    Iron ore for immediate delivery to China's Tianjin port
.IO62-CNI=SI rose 1.1 percent to $63.30 per tonne on Tuesday,
its strongest since June 15, according to data compiled by The
Steel Index (TSI).
    The 19.5 percent rally in the spot benchmark on Monday was
its biggest gain since TSI began assessing prices in 2008.
    Commonwealth Bank of Australia also thinks the sharp
increase in iron ore above $60 is unsustainable, predicting
prices would recoil to $40-$45 in the short term.
    "We currently forecast China's crude steel output to
contract again this year due to weaker domestic consumption,
with steel exports unlikely to provide any real offset as
countries put up trade barriers on steel," the bank said in a
note.
    
  Rebar and iron ore prices at 0353 GMT
                                                                                                                   
  Contract                          Last    Change   Pct Change
  SHFE REBAR MAY6                   2071    -76.00        -3.54
  DALIAN IRON ORE DCE DCIO MAY6    410.5    -11.00        -2.61
  SGX IRON ORE FUTURES MAY         50.24     -2.93        -5.51
  THE STEEL INDEX 62 PCT INDEX      63.3     +0.70        +1.12
  METAL BULLETIN INDEX             63.63     -0.11        -0.17
                                                                                                                   
                                                                                                                   
  Dalian iron ore and Shanghai rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.5145 Chinese yuan)

 (Reporting by Manolo Serapio Jr.; Additional reporting by Ruby
Lian in Shanghai; Editing by Joseph Radford)

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