March 7, 2014 / 8:28 AM / 3 years ago

UPDATE 1-Shanghai steel hits contract low on demand doubts, Dalian ore sinks

* Shanghai rebar falls for third straight week

* Dalian iron ore futures slide almost 4 pct to contract low

* Spot iron ore eyes 8th weekly loss out of nine (Adds Chaori bond default, updates prices)

By Manolo Serapio Jr

SINGAPORE, March 7 (Reuters) - Chinese steel and iron ore futures fell to contract lows on Friday, reflecting concern that 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Beijing is also stepping up its campaign to fight pollution and aims to eliminate outdated industrial plants including steel mills that could curb its demand for raw material iron ore.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 closed down 2 percent at 3,335 yuan a tonne, after falling to 3,322 yuan earlier, the lowest for the contract.

Rebar, a steel product used in construction, fell 2.5 percent for the week, extending 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.

China recorded its first domestic bond default as expected on Friday when loss-making solar equipment producer Shanghai Chaori Solar Energy Science and Technology Co Ltd missed an interest payment, setting a landmark for market discipline.

Iron ore for delivery in September on the Dalian Commodity Exchange slid by its daily downside limit of 3.9 percent to close at the session low of 764 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 had dropped 1 percent on the week till Thursday's close, in what could be its eighth decline in nine weeks. (Editing by Himani Sarkar and Muralikumar Anantharaman)

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