China steel, iron ore slide nearly 4 pct on tepid demand, trade war fears
Chinese steel and iron ore futures tumbled almost 4 percent on Thursday, pressured by soft demand in the world’s top consumer of both commodities and after China warned it will respond as necessary in the event of a trade war with the United States.
U.S. President Donald Trump is expected to impose tariff of 25 percent on imported steel this week in a bid to counter cheap shipments, especially from China.
While China’s steel exports only accounted for about 2.9 percent of U.S. imports last year, Chinese Foreign Minister Wang Yi said Beijing “would have to make a justified and necessary response” in case of a trade war with the United States.
China’s total steel exports fell 16 percent from a year ago to 4.85 million tonnes in February, data showed. Its iron ore imports dropped 16 percent from January to 84.27 million tonnes.
The most-actively traded rebar contract on the Shanghai Futures Exchange declined 3.7 percent to close at 3,794 yuan ($600) a tonne, just off the day’s trough of 3,792 yuan, its weakest since Jan. 17.
But CRU analyst Richard Lu said weaker Chinese demand was the main reason for the price slide.
“It’s a short-term thing primarily because demand hasn’t really recovered at the moment,” said Lu.
Steel prices rose shortly after last month’s Lunar New Year holiday in response to further output curbs planned by Chinese cities including top steel-producing Tangshan beyond the end of the winter heating season on March 15.
But they have since dropped after traders built up ample stocks, with demand remaining slow, he said, adding the price decline should be short-lived.
“From late March to mid-May should be the peak season for construction steel products consumption because of the relatively good weather (following winter),” he said.
Steel traders have lifted stocks sharply in anticipation of a recovery in demand, with rebar inventory reaching 7.13 million tonnes on Feb. 23, the most since March last year, data compiled by SteelHome consultancy showed. SH-TOT-RBARINV
A separate inventory taken by Mysteel consultancy showed steel stocks at Chinese traders topping 10 million tonnes on March 1, said Lu.
Steel’s weakness spread to prices of its raw materials. The most-traded May iron ore on the Dalian Commodity Exchange ended down 3.8 percent at the intraday low of 500.50 yuan per tonne, a level last seen on Dec. 15.
Coking coal dropped 3.4 percent to 1,324.50 yuan a tonne and coke slid 3.1 percent to 2,112 yuan.
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB slipped 0.3 percent to $75.84 a tonne on Wednesday, its weakest since Feb. 5, according to Metal Bulletin.
Source: Reuters (Reporting by Manolo Serapio Jr. Editing by Joseph Radford)