Chinese steel and iron ore futures slid again on Wednesday with construction demand slowing over the hot and rainy summer season and traders still worriedthere wasn't enough life in China's real estate market to spark optimism in the coming months.
I think some steelmakers might be more positive because they can now do some overhauls and replenish their (iron ore) stocks at cheaper prices next month, but traders don't really have good expectations," said a northern China-based trader.
After hitting record levels in June, daily crude steelproduction rates are expected to dip slightly in July, mostly for seasonal reasons.
Rebar prices on the Shanghai Futures Exchange endedWednesday at 3,036 yuan ($490) per tonne, down 0.46 percent,their sixth daily decline in a row. The most-active iron ore contract for September delivery on the Dalian Commodity Exchange ended Wednesday down 0.87 percent at 683 yuan a tonne.
Iron ore for immediate delivery into China .IO62-CNI=SI dipped 0.6 percent to $95.4 per tonne on Tuesday, the fourth daily decline in a row. The price is 27.6 percent lower than the same period of last year, largely because of supply increases.
Mining giant BHP Billiton said on Wednesday that it mined a record 225 million tonnes in the fiscal year 2014, 4 percent higher than its forecast.
Having written off a largely disastrous first six months, traders are carefully watching for signs of improvement in the second half of the year, and are hoping for more government support for the property sector.
Industry consultancy Custeel, an affiliate of the China Iron and Steel Association, said in a research report that there remained "heavy downward pressure" on real estate. It said around 20 cities were already carrying out policies to "loosen up" the market, including easing restrictions on purchases by non-residents and providing subsidies and tax breaks.
Analysts suggest this kind of "mini-stimulus" measure is unlikely to trigger any lasting recovery in the steel market, which will continue to face relatively weak demand and credit restrictions over the remainder of the year.
"While 'mini-stimulus' measures will help raise demand, there is little possibility of any large-scale expansionary policies in the short term, and if you add the fact that this is the steel off-season, end-user demand is unlikely to improve," Bank of China International said in a note on Tuesday.
China's industry ministry said more than 21 million tonnes of steelmaking capacity will be closed this year as part of its campaign to shut outdated equipment. Hebei, China's top steelmaking province, also finalised its anti-pollution plans this week, confirming it would shut 15 million tonnes of crude steel capacity in 2014 and stop all unapproved new projects.
However, Custeel said in a separate note on Wednesday that despite the expected closures, it remained likely that steel output would continue to rise in the second half of the year.
"The withdrawal of a small number of steel mills from the market will ease steel supply pressures to a certain extent, but those large- and medium-sized steel enterprises that are less sensitive to environmental policies are capable of increasing production and filling any gap," it said.
It said new capacity was still coming on line, and despite weak product prices, few mills were willing to take the initiative by reducing their runs.
Source: Reuters