July 6, 2015 / 7:28 AM / 2 years ago

UPDATE 2-Shanghai rebar tumbles 5 pct to record low, drags down iron ore

* Rebar, iron ore futures hit daily downward limit
    * Big fall in billet surprises market, further hitting sentiment
    * Spot iron ore falls to lowest level since April 21

 (Updates prices, adds quote)
    SHANGHAI/LONDON, July 6 (Reuters) - Chinese rebar futures slumped 5 percent
to hit a record low on Monday on expectations that demand in the world's top
producer is weakening further, prompting mills to cut output and reduce
consumption of raw material iron ore.
    The most traded October rebar futures contract on the Shanghai Futures
Exchange closed at 2,027 yuan ($326.54) a tonne, the lowest since the
contract launched in 2009, hitting its daily downside limit. 
    A sluggish economy and a property downturn in China has hit steel demand and
prices, with steel mills suffering growing losses and curtailing output. 
    "The market fundamentals are too weak. Mills are making losses while traders
don't want to stock," said Li Wenjing, an analyst at Industrial Futures in
Shanghai. "An increase in iron ore port inventories last Friday and a big
decline in billet prices have dampened the market today."
    Iron ore stocks at 42 Chinese ports rose to 81.97 million tonnes on Friday,
up 1.7 percent from the previous Friday, data from industry consultancy Umetal
showed.
    Prices of billet, which often affect general market sentiment, dropped by 70
yuan to 1,730 yuan a tonne over the weekend. The fall in the semi-finished steel
product's price was bigger than expected, traders said. 
    The most active September iron ore futures on the Dalian Commodity Exchange
 touched the daily downside limit of 4 percent, falling for the seventh
day to 394.5 yuan a tonne, its lowest closing price since April 23
    Most commodity prices suffered falls on Monday, compounding worries about
oversupply, after Greece rejected terms for a bailout and top consumer China
took emergency measures over the weekend to support the stock
market. 
    The spot price for ore delivered into Tianjin port .IO62-CNI=SI sank 3.9
percent to $52 a tonne, the seventh consecutive daily decline and its lowest
level since April 21.
    "We've not necessarily seen the lows (for the year) and short-term momentum
is clearly negative, but sooner or later ... probably by the fourth quarter ...
demand for steel will recover because of Chinese policy," Bernstein analyst Paul
Gait said.
    
  Rebar and iron ore prices at 0700 GMT                               
                                                                      
  Contract                          Last    Change   Pct Change       
  SHFE REBAR OCT5                   2027   -107.00        -5.01       
  DALIAN IRON ORE DCE DCIO SEP5    394.5    -16.00        -3.90       
  SGX IRON ORE FUTURES JUL          51.4     -1.77        -3.33       
  THE STEEL INDEX 62 PCT INDEX      54.1     -1.70        -3.05       
  METAL BULLETIN INDEX             55.26     -0.37        -0.67
                                                                      
                                                                      
  Dalian iron ore and Shanghai rebar in yuan/tonne                    
  Index in dollars/tonne, show close for the previous trading day     
 
($1 = 6.2076 Chinese yuan)

 (Reporting by Ruby Lian and David Stanway; Additional reporting by Maytaal
Angel in London; Editing by Alan Raybould and David Goodman)

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