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China steel, iron ore futures hit contract lows on demand doubts
March 7, 2014 / 5:03 AM / 3 years ago

China steel, iron ore futures hit contract lows on demand doubts

* Spot iron ore eyes 8th weekly loss out of nine

* Shanghai rebar heads for third weekly fall

By Manolo Serapio Jr

SINGAPORE, March 7 (Reuters) - Chinese steel and iron ore futures fell to contract lows on Friday, reflecting concern demand from the world's top consumer of both commodities is unlikely to perk up as Beijing aims for a less-investment driven economic expansion.

China's economic planner, the National Development and Reform Commission, told parliament on Wednesday that the government will target 17.5 percent growth in fixed-asset investment this year, the slowest in 12 years.

Beijing is also stepping up its campaign to fight pollution and aims to eliminate outdated industrial plants including steel mills that could curb its demand for raw material iron ore.

"There aren't really any positive factors to stimulate the steel market in China. The expectation for the economy is not good and the anti-pollution campaign is targeting the steel sector," said a trader in Tianjin.

The most-traded rebar for October delivery on the Shanghai Futures Exchange was down 1.3 percent at 3,361 yuan a tonne by midday, after falling to 3,354 yuan earlier, the lowest for the contract.

Rebar, a steel product used in construction, has dropped nearly 2 percent this week, on course to stretch its losses to a third week in a row.

China is targeting economic growth of 7.5 percent this year, the same goal it set last year, and is prioritising reform after three decades of double-digit growth bloated the country's debt levels and polluted the country's air and water.

Iron ore for delivery in September on the Dalian Commodity Exchange slid 2.5 percent to a session low of 775 yuan a tonne, its weakest since the bourse launched iron ore futures in October.

There was some appetite for spot iron ore cargoes during the week although most buyers sought cheaper shipments in anticipation of a further decline in prices, traders said.

"We are looking at some small cargoes, but only if there's a sure buyer. Otherwise we're not taking positions at the moment," said a trader in Shanghai.

"I think the market has a bigger chance of declining instead of stabilising because fundamentals for steel have not really changed."

Iron ore for immediate delivery to China .IO62-CNI=SI gained 20 cents to $116.90 a tonne on Thursday, but not far above an eight-month low of $116.70 reached the previous day, based on data from compiler Steel Index.

Iron ore has dropped 1 percent this week, its eighth decline in nine weeks. (Editing by Himani Sarkar)

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