China steel falls as record output undermines steps to curb excess

16 May 2017

Chinese steel rebar prices fell on Monday after data showed the world's top producer churned out a record tonnage for a second month as mills raced for profits, stoking concerns about a global glut even as Beijing ramps up its effort to curb excess.

Iron ore rose slightly, in line with a rise in the spot physical market and recovering some ground lost last week. Last week, futures prices fell for a seventh straight week.

The most-active rebar on the Shanghai Futures Exchange settled at 2,981 yuan per tonne, down 0.63 percent as leaders from 29 countries gathered for China's Belt and Road forum in Beijing. Earlier in the session, it hit 2,925 yuan, its lowest in just over a week.

On Sunday, Chinese President Xi Jinping pledged an additional $124 billion for the ambitious initiative, which is expected to expand investment links with Asia, Africa and Europe and boost demand for raw materials such as steel.

Plentiful supply, however, could undermine that potential demand despite the government's push to curb outdated, inefficient supplies. Data showed China produced 72.78 million tonnes of steel in April, surpassing March's record.

Some 31.7 million tonnes of capacity have closed so far this year, 63 percent of the target for 2017, the government said on Monday. But progress could be slow if steel prices stay high enough to incentivise production, warned Argonaut Securities analyst Helen Lau.

The most-active September iron ore on the Dalian Commodity Exchange closed at 454.0 yuan a tonne, up 0.22 percent.

Iron ore for delivery to China's Qingdao port .IO62-CNO=MB rose 1.65 percent to $61.38 per tonne on Friday, according to Metal Bulletin.

Iron ore futures dropped to near four-month lows on Friday weighed down by concerns over weak demand in the world's top consumer.