Chinese iron ore futures dropped for a second session on Thursday as investors pared bullish bets after lifting it, along with steel, to multi-year highs.
Improved steel supply in parts of China prompted some traders to cut price offers, dragging down rates on raw material iron ore that had piggybacked on the strength in the steel market.
The most-active rebar on the Shanghai Futures Exchange closed flat at 3,413 yuan ($492) a tonne. Earlier in the session, it fell as low as 3,304 yuan. The construction steel product touched 3,557 yuan on Monday, its highest since April 2014.
Iron ore on the Dalian Commodity Exchange slipped 1.1 percent to end at 608.50 yuan per tonne. It climbed to a near three-year high of 657 yuan on Monday.
Both commodities fell on Wednesday despite data suggesting that Chinese banks looked set to lend a record amount this year as Beijing boosts the economy to meet economic growth targets.
The decline indicates that “investors felt the price had surged too high, too fast,” ANZ analysts said in a note.
China’s efforts to curb overcapacity in its steel sector and stimulate economic growth with increased infrastructure spending had fueled an 88-percent rally in Shanghai rebar futures this year.
But data released on Tuesday showed China’s crude steel output rose for a ninth straight month in November, suggesting that Beijing’s closure of excess capacity has not stopped mills from producing more to chase rising prices.
The retreat in futures again pulled back spot iron ore below $80 a tonne after staying above that level for five days.
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB slid 5.1 percent to $79.18 a tonne on Wednesday, according to Metal Bulletin. The spot benchmark peaked at $83.58 on Monday, its strongest since October 2014.
An increase in the supply of billet in Tangshan led to prices for the semi-finished steel product dropping late on Tuesday, said Metal Bulletin which tracks Chinese trades.
Rebar futures followed on Wednesday, which resulted in buyers delaying their procurement plans, it said.
Source: ReutersPrevious Next