May 18, 2018 / 3:17 AM / in a year

Shanghai rebar retreats on demand-risk, raw materials follow

* Shanghai rebar falls over 1 pct to hit one-week low

* Rains in eastern, southern China dampen seasonal steel demand

By Manolo Serapio Jr

MANILA, May 18 (Reuters) - Chinese steel futures pulled back to a one-week low on Friday, with supply rising and concerns a seasonal recovery in demand could end soon.

A pickup in construction activity in China had fueled a sustained fall in traders’ steel inventories since March and pushed mills’ crude steel output in April to the highest daily average in four years.

“The seasonal improvement has waned because the rainy season is now coming, particularly in eastern and southern China,” said Richard Lu from CRU consultancy in Beijing.

Improved supply was also a drag on prices, said Lu, as steel mills ramped up production in pursuit of higher margins.

The most actively traded October rebar on the Shanghai Futures Exchange was down 1.4 percent at 3,624 yuan ($569) a tonne by 0259 GMT, after earlier touching a one-week low of 3,619 yuan.

Prices of steelmaking raw materials tracked the decline in rebar futures.

Iron ore on the Dalian Commodity Exchange dropped 0.9 percent to 477 yuan a tonne, coke slipped 1.2 percent to 2,081 yuan and coking coal slid 2.4 percent to 1,228 yuan.

On the spot market, iron ore for delivery to China’s Qingdao port .IO62-CNO=MB fell 0.8 percent to $67.49 a tonne on Thursday, according to Metal Bulletin.

BMI Research said that while it has raised its average iron ore price forecast for this year to $60 from $55 due to a stronger-than-expected rally from late 2017 to early 2018, it sees weakness ahead.

“We expect iron ore prices to fall over the coming months and subsequent years as Chinese economic growth refocuses away from heavy industry to services, dampening global demand for iron ore,” BMI Research, a unit of Fitch Group, said in a note. ($1 = 6.3702 Chinese yuan) (Reporting by Manolo Serapio Jr. Editing by Joseph Radford)

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