Shanghai rebar inches down on weak demand concerns
Chinese construction steel rebar futures edged lower on Friday as investors remain cautious amid concerns about the state of the economy, although Beijing has pledged to boost domestic spending and control steel capacity.
Stocks of steel products held by Chinese traders, an indicator of demand in the country, rose by 453,200 tonnes as of Jan. 11 to 8.83 million tonnes, data compiled by Mysteel Consultancy showed.
Traders typically replenish their stocks ahead of the Chinese new year break, due in early February this year, and sell them when downstream users go back to work after the week-long holiday.
Winter stocking has begun in some regions, but most traders are still on the sidelines, said analysts from Huatai Futures and CITIC Futures in notes, adding that the restocking process has been slower than last year.
“Many people have learnt lessons from last year’s loss and don’t want to hoard too much this year … and there is still not enough direct stimulus from the central government to support steel demand,” said a steel trader in northeastern province of Liaoning.
Traders stocked up heavily before the new year holiday last year, but many lost money when demand was weaker than expected, driving steel prices down nearly 20 percent within a month.
China’s industry minister said on Thursday that the country will further lower tax rates on the manufacturing industry, and will “strictly prohibit” the expansion of new iron and steel projects in 2019.
The comments came after the top state planner earlier this week pledged to introduce policies to strengthen domestic consumption on items such as autos and home appliances this year.
However, the initiatives met with a lukewarm response, with benchmark Shanghai rebar prices easing 0.4 percent to 3,509 yuan ($518.57) a tonne and hot-rolled coil futures down 0.4 percent to 3,415 yuan.
Prices of steelmaking raw ingredients mostly went up on Friday, buoyed by increasing demand as more steel mills resume operations.
Weekly utilisation rates at steel mills across the country reached 64.36 percent this week as of Jan.11, up 0.14 percentage points from previous week, data tracked by Mysteel showed.
Dalian coking coal futures rose 1.3 percent to 1,207 yuan, while coke inched up 0.1 percent to 1.941 yuan.
The most-traded iron ore contract for May delivery on the Dalian Commodity Exchange dipped 0.3 percent to 507 yuan.
Source: Reuters (Reporting by Muyu Xu and Dominique Patton; editing by Richard Pullin)