April 16, 2018 / 2:58 AM / 3 months ago

China's iron ore, steel sinks; investors shrug off stockpile reduction

* Stockpiles of rebar, iron ore continue to drop

* Weak domestic and overseas demand weigh on market

* Utilisation rate climbed back to highest since Nov

BEIJING, April 16 (Reuters) - China’s iron ore futures dropped in line with steel rebar futures on Monday, despite the decline in stockpiles, while concerns over leaner downstream demand pulled down sentiment.

The most-active iron ore contract for September delivery on the Dalian Commodity Exchange was down 2.1 percent at 441 yuan ($70.20) a tonne, as of 0253 GMT.

Construction steel rebar futures on the Shanghai Futures Exchange dipped 0.9 percent to 3,393 yuan per tonne.

Stockpiles of rebar continued to fall last week, dropping by 521,600 tonnes to 8.68 million tonnes. Meanwhile, iron ore inventory at Chinese ports declined by 731,600 tonnes to 160.4 million tonnes compared with a week ago, data from Mysteel Consultancy showed.

“Process of reducing steel products inventory is going on smoothly, which helps to lift sentiment of the market. However, outlook of weak demand in both domestic and overseas market adds pressure on prices,” said Zhu Hao, analyst, Orient Futures.

Exports in the world’s second-biggest economy unexpectedly fell in March, resulting in a rare trade deficit. Steel exports continued to fall last month, down 25.3 percent to 5.65 million tonnes, customs data showed on Friday, as Beijing curbed production to tackle smog, driving up local prices.

On Friday, China’s securities regulator disclosed that the country will allow foreign investors to trade in domestic iron ore futures markets starting May 4, latest effort by Beijing to internationalise its commodities market.

“Opening iron ore futures market will lead to limited effect on prices as Dalian’s prices have already linked tight with Singapore,” said Zhu.

“In a short term, the climbing utilisation rate at steel mills are more likely to drive iron ore prices, but will add pressure on steel supply.”

The utilisation rate at steel mill blast furnace across China increased by 1.93 percentage points to 66.99 percent last week from prior week, touching the highest since early November, data from the Mysteel showed.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose $0.25 a tonne to $64.96 per tonne on Friday, according to Metal bulletin. ($1 = 6.2820 Chinese yuan) (Reporting by Muyu Xu and Josephine Mason, Editing by Sherry Jacob-Phillips)

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