China steel futures end flat after early drop

29 August 2017

China's steel rebar futures closed nearly flat on Tuesday after a slide during morning trade, with investors still wondering whether a recent rally is sustainable amid uncertainty over future prospects for exports to the United States.

The most-active rebar on the Shanghai Futures Exchange ended almost flat at 3,882 yuan($587.84) a tonne on Tuesday. It pulled back from as low as 3,839 yuan a tonne before the market closed in afternoon.

"Investors are taking a cautious stance as they think steel prices have gone a bit too high," said Liu Xinwei, analyst at China Sublime Information Group.

Prices for steel rebar had hovered around a technical barrier of 4,000 yuan a tonne since early this month, bolstered by Beijing's drive to reduce production. China wants to keep air pollution under control in the winter in the north, including in top steel-producing province Hebei, with some cities being ordered to cut output by as much as 50 percent.

"Despite the air pollution control target issued by Beijing, the market is waiting for more detailed plans for capacity shutting," said analyst Liu.

Stockpiles of rebar rose to 3.88 million tonnes on Friday from 3.84 million tonnes, still less than half of this year's peak of 8.4 million tonnes reached in February, according to SteelHome consultancy.

Spot rebar prices fell 0.5 percent to 4,291.2 yuan a tonne on Monday, according to data on the Mysteel website.

The most-traded iron ore on the Dalian Commodity Exchange dropped 2.7 percent to 554 yuan per tonne on Tuesday.

Stockpiles of imported iron ore at China's ports continue to decline, dropping to 133.45 million tonnes on Friday from 135.2 million tonnes in the previous week, according to data tracked by SteelHome.

Meanwhile the January coking coal contract extended losses on Tuesday, falling 4.7 percent to 1,403 yuan a tonne. Coke futures closed 2.5 percent lower to 2,387.5 yuan a tonne.