Steel reinforcement-bar futures dropped the most since November and were set for their first weekly loss in six, on speculation that accelerating inflation in China may limit room for easing to support a recovery.
Rebar for May delivery declined 2.4 percent to end at 3,925 yuan ($631) a metric ton on the Shanghai Futures Exchange, the biggest decline for the most active contract since Nov. 19. Futures fell 1.6 percent this week.
China’s inflation quickened more than forecast to a seven-month high of 2.5 percent in December as the coldest winter in 28 years pushed up vegetable prices, making further policy loosening less likely after data yesterday on exports and credit growth underscored the strength of the economy.
“The recent rally has already absorbed the strong expectation of an improving Chinese economy,” said Huang Huiwen, an analyst at Shanghai CIFCO Futures Co. “Producer prices indicate that fundamentals are not improving substantially, so any further rally could be difficult.”
Rebar prices surged 14 percent in December, the most since July 2009, as the country’s economy headed for a recovery in the final three months of the year after a seven-quarter slowdown. The government increased infrastructure spending and accelerated investment-project approvals.
The average spot price for rebar fell 0.3 percent to 3,764 yuan a ton yesterday, according to data from Beijing Antaike Information Development Co.
Spot iron ore at Tianjin port dropped 0.2 percent to $158.20 a dry ton yesterday, according to The Steel Index Ltd.
— With assistance by Feiwen Rong, and Helen Sun