Chinese Steel Futures Swing to Losses on Week Demand

Published: 25 July, 2016 09:15

Chinese steel futures swung to losses after a moderate gain on Monday (July 25) as cooling demand in flood-hit regions outweighed output cuts in a key industrial region.

Spot steel prices in some northern regions fell after the floods interrupted transportation and sales as well as hit demand, despite a mandated output cut in Tangshan, a key steel producing area, traders said.

“The positive news is a bigger output cut, particularly for coking plants, in Tangshan, but demand has also been hit by floods in some regions. The market could be volatile this week,” said Yu Yang, an analyst with Shenyin & Wanguo Futures in Shanghai.

Benchmark prices for October rebar on the Shanghai Futures Exchange traded slightly lower at 2,342 yuan ($350.68) a tonne by close.

Prices dropped 7 per cent last week as investors booked profit on four straight weekly gains and worried over China’s slowing property market and its impact on demand for steel products.

Seventy-two people have been killed and 78 are missing in Hebei province after rain triggered floods and landslides. In central Henan province, 15 people were killed and eight were missing, state media reported on Saturday (July 23).

Slowdown expected

Some analysts also expected steel demand in the world’s top producer to be hit by a slowdown and suspension at construction sites in regions near eastern China’s Hangzhou city, where the next G20 leaders’ summit will be held in early September.

Tangshan city in the top steel-producing province of Hebei has deepened mandated output cuts to improve air quality for a memorial day for a 1976 earthquake that killed at least 250,000 people.

The output cuts kicked off on July 12 but the pace has accelerated, traders said.

On the Dalian Commodity Exchange, the September iron ore contract rose 1 per cent to 442.5 yuan. Coke surged more than 4 percent amid supply shortage after the output cut while coking coal rose more than 2 per cent.

Iron ore for immediate delivery to China’s Tianjin port dropped 40 cents to $55.70 a tonne on Friday, according to The Steel Index. The index dropped 3.6 percent last week but has still jumped around 30 percent so far this year.

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