November 12, 2015 / 4:18 AM / 2 years ago

Shanghai rebar sinks to record low, pressures iron ore

* Dalian iron ore lower, spot near 2015 bottom
    * Brazil govt says may fine Vale, BHP for Samarco disaster

    By Manolo Serapio Jr
    MANILA, Nov 12 (Reuters) - Shanghai steel futures fell more
than 1 percent to a record low on Thursday, pressured by
shrinking demand in top consumer China that has dented appetite
for raw material iron ore.
    With falling prices seen forcing more Chinese steel mills to
either cut output or close, demand from the biggest iron ore
buyer is at risk, keeping ore prices lower for longer as top
suppliers fight for more market share.
    "It's now getting difficult for any trader who has seaborne
cargo to sell before the ship arrives," said an iron ore trader
in Shanghai.
    "Mills are quite pessimistic about the steel market and they
don't want to take any risk by taking on forward cargoes," he
said.
    Construction-used rebar for May delivery on the Shanghai
Futures Exchange was down 1.2 percent at 1,763 yuan 
($277) a tonne by midday after falling as far as 1,760 yuan.
That was the lowest for a most-active contract since the bourse
launched rebar futures in 2009.
    On the Dalian Commodity Exchange, January iron ore 
slipped 0.3 percent to 346 yuan a tonne.
    A global glut has dragged spot prices to below $45 a tonne
this year, less than a quarter of record highs seen in 2011,
forcing many high-cost producers out of the market.
    The outlook for iron ore prices remains bearish, Goldman
Sachs analyst Christian Lelong said, citing rising port
inventories in China and profit margins of Chinese steel mills
near a record low amid poor demand.
    Lelong said weak construction activity in China during the
last quarter of the year is also a key headwind for iron ore
prices.
    "Moreover, a lack of optimism about 2016 should limit the
scale of restocking in steel products in early 2016," he said in
a note.
    Benchmark 62-percent grade iron ore for immediate delivery
to China's Tianjin port .IO62-CNI=SI stood at $47.70 a tonne
on Wednesday, according to The Steel Index, still near this
year's low of $44.10.   
    In Brazil, the government said it may fine mining giants BHP
Billiton Ltd and Vale SA for the
"environmental catastrophe" caused by ruptured dams at an iron
ore mine jointly owned by the companies in a southeastern state.
 
    
  Rebar and iron ore prices at 0357 GMT
                                                                                    
  Contract                          Last    Change   Pct Change
  SHFE REBAR MAY6                   1763    -22.00        -1.23
  DALIAN IRON ORE DCE DCIO JAN6      346     -1.00        -0.29
  SGX IRON ORE FUTURES DEC         45.13     -0.40        -0.88
  THE STEEL INDEX 62 PCT INDEX      47.7     +0.30        +0.63
  METAL BULLETIN INDEX             48.58     +0.34        +0.70
                                                                                    
                                                                                    
  Dalian iron ore and Shanghai rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.3646 Chinese yuan)

 (Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)

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