October 8, 2019 / 3:50 AM / 11 days ago

Shanghai steel futures fall to 2-wk low as China returns from holiday

* Rebar down as much as 2.4%, iron ore rises 2.1%

* Tangshan city steps up fines in pollution battle

* Deal hopes dim ahead of U.S.-China trade talks

By Enrico Dela Cruz

MANILA, Oct 8 (Reuters) - Shanghai steel futures fell to their lowest in two weeks on Tuesday, reflecting worries about demand and excessive supply in China, while Dalian iron ore rose on the first trading day after the week-long National Day break.

The most-traded construction steel rebar contract on the Shanghai Futures Exchange, for January 2020 delivery, fell as much as 2.4% to 3,402 yuan ($477.43) a tonne, the benchmark contract’s weakest level since Sept. 23. It was at 3,435 yuan at 0336 GMT.

Hot-rolled steel coil, used in cars and home appliances, fell as much as 2% to 3,410 yuan a tonne, also the lowest since Sept. 23, and was at 3,443 yuan at the mid-day break.

Despite its trade war with the United States, China’s steel output is forecast to grow around 7% this year, Westpac Institutional Bank said in its October market outlook, after churning out a record 928.26 million tonnes in 2018.

Steel sales in China, however, have softened as growth in the machinery sector reversed and started to slow, while the offset from infrastructure has not been sufficient, Westpac analysts said.

“The Chinese administration clearly stated at the July Politburo economic meeting that property will not be used to boost growth this time so this significant part of steel demand is unlikely to come to the rescue in 2020,” they said.

Steel futures prices slumped despite plans by some Chinese steel mills to push prices higher in the coming days, according to a Shanghai-based trader.

“We have received several notices from mills saying they plan to adjust prices upwards in a move to test the market and gauge demand after the holidays,” the trader said.

FUNDAMENTALS

* Stainless steel was down 0.4% at 15,640 yuan a tonne at the break.

* Prospects for progress in U.S.-China trade talks dimmed on Monday after Washington blacklisted Chinese companies over Beijing’s treatment of predominantly Muslim ethnic minorities, and President Donald Trump said a quick trade deal was unlikely.

* The most-traded iron ore on the Dalian Commodity Exchange climbed as much as 2.1% to 665.50 yuan a tonne, erasing an earlier decline.

* Demand for iron ore in China may pick up as steel production controls imposed ahead of the National Day holidays may be relaxed, while a drop in shipments of the raw material from Brazil in recent weeks may also provide support to prices, Argonaut Securities analyst Helen Lau said.

* Spot iron ore benchmark SH-CCN-IRNOR62 settled at $94 a tonne before the holidays.

* China’s smog-prone northern city of Tangshan has issued new guidelines to punish and prosecute companies and individuals found guilty of pollution offences, amid warnings it might miss its air quality goals for this year.

* Dalian coking coal rose 1.3% to 1,258 yuan a tonne while coke edged up 0.2% to 1,888 yuan.

($1 = 7.1256 yuan)

Reporting by Enrico dela Cruz; editing by Christian Schmollinger

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