China's iron ore, steel sinks; investors shrug off stockpile reduction

reuters.com Iron Ore,  futures 2018-04-17 08:31:00

China's iron ore futures dropped in line with steel rebar futures on April 16, despite the decline in stockpiles, while concerns over leaner downstream demand pulled down sentiment.


The most-active iron ore contract for September delivery on the Dalian Commodity Exchange DCIOcv1 was down 2.1% at 441 yuan/t ($70.2/t), as of 0253 GMT.


Construction steel rebar futures on the Shanghai Futures Exchange SRBcv1 dipped 0.9% to 3,393 yuan/t.


Stockpiles of rebar continued to fall last week, dropping by 521,600 tonnes to 8.68 million tonnes. Meanwhile, iron ore inventory at Chinese ports declined by 731,600 tonnes to 160.4 million tonnes compared with a week ago.


"Process of reducing steel products inventory is going on smoothly, which helps to lift sentiment of the market. However, outlook of weak demand in both domestic and overseas market adds pressure on prices," said Zhu Hao, analyst, Orient Futures.


Exports in the world's second-biggest economy unexpectedly fell in March, resulting in a rare trade deficit. Steel exports continued to fall last month, down 25.3% to 5.65 million tonnes, customs data showed, as Beijing curbed production to tackle smog, driving up local prices.


On April 13, China's securities regulator disclosed that the country will allow foreign investors to trade in domestic iron ore futures markets starting May 4, latest effort by Beijing to internationalise its commodities market. Iron ore futures market will lead to limited effect on prices as Dalian's prices have already linked tight with Singapore," said Zhu.


"In a short term, the climbing utilisation rates at steel mills are more likely to drive iron ore prices, but will add pressure on steel supply."


The utilisation rate at steel mill blast furnace across China increased by 1.93 percentage points to 66.99% last week from prior week, touching the highest since early November.


Iron ore for delivery to China's Qingdao port .IO62-CNO=MB rose $0.25/t to $64.96/t on April 13, according to Metal bulletin.


(Writing by Jessie Jia  Editing by Harry Huo)
For any questions, please contact us by inqury@fwenergy.com or +86-351-7219322.

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