China steel, iron ore eke out modest gains in cautious market

22 June 2016

Chinese steel and iron ore futures edged up on Tuesday, but remained below recent highs amid expectations of slack demand in the near term.

Construction activity typically slows during summer in China before picking up steam again around September, prompting many mills across the country to curb production.

"I've heard some of the producers are keeping very low utilization rates at the moment, trying to produce less steel to prop up prices," said Richard Lu, analyst at CRU consultancy in Beijing.

The most-traded rebar, a construction steel product, on the Shanghai Futures Exchange closed up 0.4 percent at 2,082 yuan a ton, far below a five-week top of 2,189 yuan reached on June 13.

Lu expects demand for long steel products, or those used in construction including rebar, to be "very flat" over the next one to two months.

"We can probably see some restocking towards end-August and a bigger effort in September when there will be another round of peak construction through October," said Lu.

Spot steel prices in China have dropped amid thin demand, with billet slipping 40 yuan a ton on Monday after losing 20 yuan over the weekend, according to The Steel Index (TSI).

Appetite for spot iron ore cargoes remained limited, traders said, with the spot benchmark trapped at around $50 a ton for about a week now.

Iron ore for immediate delivery to China's Tianjin port slipped 0.2 percent to $50.60 on Monday, data compiled by TSI showed.

Iron ore traded on the Dalian Commodity Exchange ended 0.5 percent higher at 374 yuan a ton. The contract touched a four-week peak of 379.50 yuan on June 13.

Rio Tinto, the world's No. 2 iron ore miner, said it appointed Chris Salisbury as head of its iron ore business, replacing veteran Andrew Harding, in a reshuffle of its executive team.

Salisbury, currently acting head of Rio Tinto's copper and coal unit, will take up the role on July 2.


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