* Dalian iron ore sheds as much as 2.3% in early trade
* China’s rebar stockpiles at record high - SteelHome data
* Weak Chinese steel demand may persist in March - analyst
By Enrico Dela Cruz
MANILA, March 4 (Reuters) - Iron ore futures in China dropped more than 2% on Wednesday after climbing for two sessions, as the country’s steadily rising inventory of steel products raised doubts over a recovery in demand for the steelmaking raw material.
Investors also fretted over the magnitude of economic fallout from a global coronavirus outbreak, further weighing on iron ore and other ferrous derivatives in China, the world’s top steel producer and exporter.
The Dalian Commodity Exchange’s most-traded iron ore contract, expiring in May, fell as much as 2.3% to 639 yuan ($91.98) a tonne. Steel prices on the Shanghai Futures Exchange wobbled.
“Weak fundamentals put pressure on futures prices,” analysts at SinoSteel Futures Co Ltd in Beijing wrote in a note, adding that while steel product inventories remain high, downstream demand may stay weak for some time.
“New orders tumbled to 19.8 from 39.6 in January, which is worrying because it implies steel demand in March may have yet to pick up as fast as expected,” Helen Lau, a metals and mining analyst at Argonaut Securities in Hong Kong said, citing data from Monday that showed China’s factory activity plunged in February.
Iron ore and steel futures gained over the past two days on expectations that China’s government would aggressively roll out further policy support for the coronavirus-hit domestic economy.
However, the lack of clarity on the timing and effectiveness of any further stimulus measures from Beijing tempered optimism.
* China’s construction steel rebar inventory SH-TOT-RBARINV has piled up to a record high, while stockpiles of hot-rolled coil SH-TOT-HRCLINV, used in cars and home appliances, hit their highest in two years, based on industry data tracked by SteelHome consultancy.
* China’s central bank kept short-term borrowing costs steady on Wednesday, shrugging off the U.S. Federal Reserve’s emergency policy rate cut overnight.
* Shanghai rebar was up 0.6% by 0320 GMT, after falling as much as 0.8% earlier in the session, while hot-rolled coil was flat.
* Stainless steel shed as much as 1.5%.
* Other ferrous raw materials also retreated, with coking coal slipping as much 0.8%, and coke down 1.2%.
* Spot iron ore prices jumped to one-week highs on Tuesday, with the benchmark 62% grade settling at $89 a tonne, supported by stockpiling by some steel mills, SteelHome data showed. SH-CCN-IRNOR62
($1 = 6.9469 yuan)
Reporting by Enrico dela Cruz; Editing by Devika Syamnath