Tuesday, 21 Jun 2011
Reuters reported that Shanghai steel futures fell half 1% to fresh three month lows on Monday as tighter credit continued to cloud the outlook for steel demand in top market China.
China central bank raised bank reserve ratios last week for the ninth time since October to try to curb inflation that is running at its quickest pace in nearly three years.
A shipping manager for an iron ore trading firm in Shanghai said "At the rate China continues to tighten policy, I think domestic steel demand will suffer. Another major factor is the heavy rains in a lot of parts in China which are slowing construction activities."
The most-traded October rebar contract on the Shanghai Futures Exchange dropped to as low as CNY 4,696 per tonne and its weakest since March 24. The contract stood at CNY 4,707 down by CNY 24 by the midday break.
A further decline in steel prices could weaken demand for iron ore, the key steelmaking component. Iron ore prices have been stuck in narrow ranges since falling to two month lows earlier this month. The Steel Index 62% iron ore benchmark .IO62-CNI=SI dropped 0.3% to USD 173.60 a tonne on Friday and a similar index by Platts IODBZ00-PLT eased 0.4% to USD 175.
Despite tighter credit and weather issues hitting steel demand, China steel production remained strong. (sourced from Reuters)
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