Steel reinforcement-bar futures in Shanghai dropped to the lowest closing level ever as Chinese mills churn out record amounts of steel while growth in the economy and the property market ease.
The contract for delivery in October on the Shanghai Futures Exchange fell 0.9 percent to 3,195 yuan ($513) a metric ton, the cheapest price for a last trade of the day for a most-active contract since the securities began in 2009.
Crude steel output in China, which accounted for half of global production in 2013, averaged a record 2.27 million tons a day in the first three months of this year, according to the National Bureau of Statistics. Rebar has dropped 11 percent this year as the economy is projected to expand at the slowest pace since 1990.
“The market is succumbing to the weight of record output while any pick-up in demand is only seasonal,” said Xia Caijun, an analyst at GF Futures Co. in Guangzhou.
China’s broadest measure of new credit fell 19 percent in the first quarter from a year earlier, while new building construction tumbled 25 percent, according to the government. New-home price gains have eased across the country as tighter credit prompted developers to give discounts.
Supply will exceed demand forecast at 750 million tons this year, weighing down steel prices after the second quarter when the seasonal demand pick-up tapers off, according to Wu Wenzhang, chief analyst for Shanghai Steelhome Information Technology Co.
The weakening outlook for rebar will also put pressure on the iron ore market, affecting global miners who have increased shipments of the raw material, according to Mysteel Research’s chief analyst, Jia Liangqun.
Iron ore mining companies in China face a rising challenge from increased overseas supplies of the steel-making raw material, and some higher-cost capacity will probably be forced to close, according to BHP Billiton Ltd. (BHP)
Iron ore futures for September delivery on the Dalian Commodity Exchange fell 2.5 percent to close at 749 yuan a ton, the lowest level for a most-active contract since March 24. Spot ore at China’s Tianjin port gained 0.1 percent to $106 a dry ton yesterday, and has dropped 21 percent this year.
Rebar for immediate delivery tracked by Beijing Antaike Information Technology Development Co. fell 0.1 percent today to 3,320 yuan a ton, the lowest since April 8.
Hot-rolled coil futures for October delivery in Shanghai dropped 0.4 percent to close at 3,320 yuan a ton.
Over-the-counter iron ore swaps for May delivery in Singapore fell 0.1 percent to $106.56 a ton yesterday.
The difference between Chinese iron ore prices and the global market was at $19.99, from $21 yesterday. A higher number makes imports more attractive.