China steel, iron ore extend losses amid slow demand

19 January 2017

Chinese steel and iron ore futures fell for a second session on Thursday as demand for the commodities turned tepid ahead of the Lunar New Year holiday late next week.

Iron ore dropped from a three-year high reached on Wednesday and traders say that could pull down bids for physical cargoes in the spot market as restocking appetite wanes.

The most-active iron ore on the Dalian Commodity Exchange was down 1.6 percent at 632 yuan ($92) a tonne by 0251 GMT, after peaking at 666 yuan in the prior session.

Rebar on the Shanghai Futures Exchange eased 1.2 percent to 3,249 yuan per tonne, slipping further from Monday's one-month peak of 3,418 yuan.

China's renewed campaign to cut excess capacity, targeting producers of substandard steel, has fueled another rally in steel prices this year after sharp gains in 2016. That has pulled iron ore prices higher, even outpacing steel.

"We didn't feel the excitement of the market when it went up sharply this week," said a Shanghai-based iron ore trader, citing few spot deals with most mills having replenished stockpiles ahead of the week-long Spring Festival break that starts on Jan. 27.

Iron ore inventory at China's ports stood at 118.15 million tonnes on Jan. 13, the most since 2004, according to data tracked by SteelHome.

"I think people were a little bit too optimistic about steel demand. From what I heard in the Tangshan steel market, even though they were quoting higher prices, trading activity was not so great and somebody was talking about how difficult it still was to sell steel products," the trader said.

The rapid spike in steel and iron ore futures this week suggested speculative investors took advantage of upbeat sentiment for the sector to raise bets in these commodities as they did last year. China's exchanges later hiked trading fees to tame the wild price swings.

Iron ore for delivery to China's Qingdao port .IO62-CNO=MB rose 0.6 percent to $82.05 a tonne on Wednesday, according to Metal Bulletin, but down from Monday's two-year high of $83.65.

China steel, iron ore extend losses as speculators cut bets

23 March 2017

Chinese steel and iron ore futures fell sharply for a second straight session on Wednesday as investors continued to cash in on recent gains even as the outlook in the physical market was supported by a seasonal pickup in demand.

The losses in both commodity futures came after they posted their largest weekly increases in two months last week, and traders say the wild swings in the futures market have unnecessarily swayed the physical market.As futures slid, spot iron ore on Tuesday tumbled more than 4 percent, its steepest single-day drop in more than three months.

"A lot of speculative players in the paper market create volatility in the price and this volatility has affected the physical market," said an iron ore trader in Shanghai.

"Fundamentals have not changed so much. Seasonal demand is still happening because the temperature in most areas in China is warm enough for construction projects to proceed."

The most-active rebar on the Shanghai Futures Exchange closed down 4.7 percent at 3,117 yuan ($453) a ton.Iron ore on the Dalian Commodity Exchange slipped 4.4 percent to end at 665.50 yuan per ton.

Earlier in the session, both commodities touched their lowest since March 13.But Morgan Stanley said declining inventory at both Chinese traders and mills "suggest rising demand".

Steel stocks at traders dropped 2.5 percent as of March 17 from the previous week, while those at major mills dived 8.3 percent on Feb. 28 from Feb. 20 onwards, Morgan Stanley stated in a report.

Further weakness in futures could drag down spot iron ore prices again as prospective buyers pare down bids for physical cargoes, traders said.

Iron ore for delivery to China's Qingdao port slid 4.3 percent to $87.59 a ton on Tuesday, the lowest since March 10, according to Metal Bulletin.It marked the largest drop for the spot benchmark since December 2016.