September 11, 2013 / 5:13 AM / 4 years ago

Shanghai rebar extends losses as Shagang cuts prices

* Shagang cuts prices of mid-Sept bookings by 30 yuan
    * Steel mills hold back restocking iron ore
    * Some traders expect a new round of restocking in Q4

    By Ruby Lian and Fayen Wong
    SHANGHAI, Sept 11 (Reuters) - Chinese steel futures extended
losses on Wednesday as investors grew concerned about slower
demand after Jiangsu Shagang, the country's largest private
steelmaker, cut prices for mid-September orders.
    Shagang, China's biggest producer of rebar, will cut
mid-September booking prices of rebar and wire rod used for
construction by 30 yuan ($4.90) a tonne. The mill's pricing
policies are considered a barometer for the rebar market.
    "Shagang's price cut suggested that they could face
resistance from buyers who refuse to take higher prices, and
traders are worried that demand is not improving as strongly as
expected," said a steel trader in Shanghai.
    The most active rebar futures contract on the Shanghai
Futures Exchange dipped 0.35 percent to 3,723 yuan a
tonne by the midday break. The contract dropped 0.4 percent in
the previous session.
    However, the stabilizing economy and Beijing's efforts to
boost infrastructure investment are expected to prevent rebar
futures from slumping to the low hit a year ago just above 3,400
yuan, when China's economy saw a sharp slowdown. 
    That was the lowest mark since the Shanghai rebar contracts
started trading in 2009. 
    For iron ore, the expectation of increased supplies of the
steelmaking raw material from global miners in coming months
have put Chinese steel mills on a hold for restocking after they
replenished stockpiles last month.
    "Steel mills are not restocking at the moment after building
up some inventories and they are not willing to accept further
rises in prices, so we might see prices to go down in near
future," said an iron ore trader in northern China.
    Some traders and analysts expected a new round of restocking
to kick off in the fourth quarter for winter production, which
could give a lift to prices. 
    "With iron ore port stocks now at the lowest level since
February 2009 and mill stocks at the low end of normal, we feel
there is scope (and indeed expectation) of a restock in the
fourth quarter," Macquarie said in a research note.  
    Iron ore with 62 percent grade .IO62-CNI=SI edged up again
on Tuesday, up 0.3 percent to $135.2 a tonne, according to the
Steel Index.
    
  Shanghai rebar futures and iron ore indexes at 0330 GMT
                                                                   
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN4                   3723    -13.00        -0.35
  THE STEEL INDEX 62 PCT INDEX     135.2     +0.40        +0.30
  METAL BULLETIN INDEX            136.05     -0.34        -0.25
                                                                   
  Rebar in yuan/tonne                                              
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.1200 Chinese yuan)

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