Shanghai steel futures hit 6-week lows on higher inventory, lean demand
Steel futures in China headed lower on Thursday amid expectations that stockpiles in the world’s biggest producer and consumer of the building material will rise further, while domestic demand remained seasonally weak.
The most-active construction steel rebar on the Shanghai Futures Exchange, for October delivery, ended the session down 1.6% at 3,846 yuan ($557.64) a tonne, its weakest finish since June 21.
Hot-rolled steel, used in cars and home appliances, slipped 0.9% to 3,781 yuan a tonne, its lowest close since June 21.
Steel inventory in China stood at 12.6 million tonnes, as of July 26, the highest level in three months and 27% higher than the year-ago stockpile, said Argonaut Securities analyst Helen Lau.
Steel production may remain brisk amid market talk that China’s top steelmaking city of Tangshan will extend but loosen its anti-pollution production curbs throughout August.
“Steel inventory may go up further, while domestic demand remains sluggish as the PMI (Purchasing Managers’ Index) leading indicators show,” Lau said.
About 1.34 million tonnes of pig iron will be added to the supply, which will also lead to an additional 2 million tonnes of iron ore demand, if the Tangshan curbs are relaxed as proposed by the local government, she said.
“Therefore, we expect steel prices to be under pressure,” Lau said, adding that iron ore prices should thus remain supported.
Hopes for additional measures from the government to boost demand for steel dimmed as China has ruled out using the property market as a form of short-term stimulus.
