March 7, 2018 / 7:57 AM / 13 days ago

UPDATE 1-Shanghai rebar falls nearly 2 pct amid trade war fears

    * China stocks also slip after Trump adviser quits
    * Iron ore, coking coal drop to lowest in a month
    * But expectations of construction pick-up in China remain

 (Recasts, adds analyst comment, updates prices)
    By Manolo Serapio Jr
    MANILA, March 7 (Reuters) - Chinese steel futures fell
almost 2 percent on Wednesday, dropping along with other riskier
assets in Asia after a key advocate for free trade in the U.S.
government resigned, stoking worries Washington will proceed
with steep tariffs that could risk a trade war.
    Asian equities and other commodities from oil to copper also
headed south after Gary Cohn, Trump's top economic adviser and a
voice for Wall Street in the White House, said on Tuesday he
would resign.                         
    Chinese stocks reversed early gains to end lower as
investors exercised caution, waiting for the impact of U.S.
President Trump's plans to impose 25 percent tariffs on steel
imports and 10 percent on aluminium.      
    The most-active rebar on the Shanghai Futures Exchange
         closed down 1.6 percent at 3,890 yuan a tonne after
falling as far as 3,885 yuan earlier, its lowest since Feb. 23.
    It was the fourth daily drop for the construction steel
product as investors await a recovery in demand.
    Construction activity in top steel consumer China is only
resuming gradually after last month's Lunar New Year holiday and
steel stocks have risen to nearly one-year highs as traders look
ahead to a pickup in demand.
    "Slowing steel demand growth in China should curb any strong
steel supply growth, but elevated margins remain a key upside
risk to our steel production outlook," Commonwealth Bank of
Australia analyst Vivek Dhar said in a note.
    Production restrictions on most Chinese cities covered by
Beijing's winter curbs will end on March 15. While some cities,
including top steel-producing Tangshan, have declared they will
continue with output limits after mid-March, most mills are
looking forward to maximising output. 
    China's infrastructure push and environmental crackdown had
helped increase margins at steel producers, which this year
remain well above the five-year average.             
    Dhar said China's plan to close another 30 million tonnes of
steel capacity this year would still leave about 200 million
tonnes of spare capacity that "gives enough headroom for Chinese
steel production to rise".
    The most-traded May iron ore contract on the Dalian
Commodity Exchange           ended 0.5 percent lower at 517.50
yuan a tonne, near a one-month low of 515.50 yuan touched
    Coking coal          slid 2.3 percent to close at 1,347.50
yuan per tonne, after hitting a one-month trough of 1,338.50
yuan. Coke          fell 1.5 percent to 2,151 yuan.    
    Iron ore for delivery to China's Qingdao port .IO62-CNO=MB
fell 1.2 percent to $76.07 a tonne on Tuesday, its weakest since
Feb. 6, according to Metal Bulletin. 

    ($1 = 6.3274 Chinese yuan)

 (Reporting by Manolo Serapio Jr.
Editing by Sherry Jacob-Phillips and Joseph Radford)
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