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UPDATE 1-Shanghai steel drops, Dalian iron ore steady as post-rally reluctance reigns
March 9, 2016 / 7:48 AM / 2 years ago

UPDATE 1-Shanghai steel drops, Dalian iron ore steady as post-rally reluctance reigns

* Dalian iron ore erases morning losses to end slightly
higher
    * Singapore iron ore futures, Shanghai rebar cut losses

 (Recasts, updates prices)
    By Manolo Serapio Jr
    MANILA, March 9 (Reuters) - Iron ore futures in China shook
off early weakness to finish slightly higher on Wednesday and
Shanghai steel prices dropped as investors took a breather after
a recent rally to multi-month highs that many think may not be
sustained.
    But Shanghai steel futures were off the session's lows and
iron ore futures in Singapore also trimmed losses, keeping
prices not far below recent peaks.
    A surge 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,
but has recovered some lost ground to close at 2,104 yuan, down
2 percent. 
    On the Dalian Commodity Exchange, the most-traded May iron
ore finished 0.6 percent higher at 424 yuan a tonne
after dropping as much as 3.3 percent. May iron ore on the
Singapore Exchange was down 2.9 percent at $51.63 per
tonne, after touching a session low of $49.75.
    Investment bank ANZ said 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 0732 GMT
                                                                                              
  Contract                          Last    Change   Pct Change
  SHFE REBAR MAY6                   2104    -43.00        -2.00
  DALIAN IRON ORE DCE DCIO MAY6      424     +2.50        +0.59
  SGX IRON ORE FUTURES MAY         51.63     -1.54        -2.90
  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 and Anand Basu)

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