February 23, 2018 / 2:40 AM / 6 months ago

Shanghai steel holds near 5-week low on scant physical appetite

* Rebar drops for 2nd session after Chinese markets reopened

* Traders seen unlikely to lift steel stocks this week and next

* Dalian iron ore, coking coal extend modest gains

By Manolo Serapio Jr

MANILA, Feb 23 (Reuters) - Chinese rebar steel futures edged lower on Friday to trade near a five-week low plumbed in the previous session amid little appetite in the physical market as traders return only gradually after China’s week-long Lunar New Year holiday.

The most-active rebar contract for on the Shanghai Futures Exchange was down 0.4 percent at 3,864 yuan ($610) a tonne by 0223 GMT. The construction steel product earlier hit 3,841 yuan, matching Thursday’s five-week trough when the contract closed down 1.7 percent.

“While expected weak physical demand will keep physical traders quiet, another increase in steel inventories kept investor appetite weak as well,” ANZ analysts said in a note.

Inventories of rebar among Chinese traders reached 5.4 million tonnes on the week ending Feb. 9, the most since April last year, according to data compiled by SteelHome consultancy. SH-TOT-RBARINV

Steel stocks typically increase before and after the Lunar New Year holiday, as traders prepare for a pickup in demand with construction projects resuming during spring.

“I don’t expect much buying yet to happen this week or next week,” said a trader in Shanghai. “By March there will more demand.”

But the gains in iron ore futures suggest market participants are anticipating an increase in appetite for the steelmaking raw material.

Chinese steel mills are expected to boost output when winter curbs, aimed at fighting air pollution, are lifted mid-March as the winter season heating ends.

The most-traded May iron ore on the Dalian Commodity Exchange rose 0.7 percent to 541 yuan a tonne, not far below Thursday’s one-month high of 545 yuan.

Coking coal and coke prices also stayed near three-month highs reached in the prior session. Coke rose 1 percent to 2,178.50 yuan a tonne and coking coal gained 0.2 percent to 1,377.50 yuan.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB was little changed at $78.20 a tonne on Thursday, according to Metal Bulletin. ($1 = 6.3386 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Kenneth Maxwell)

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