Chinese steel futures fell for a fifth time in six sessions to hit two-week troughs on Thursday, mirroring lethargic demand in the world's biggest consumer and dragging down iron ore prices. The most-traded May rebar contract on the Shanghai Futures Exchange dropped 0.7 percent to close at 4,124 yuan a tonne, after falling as low as 4,100 yuan, a level not seen since Nov. 30.
Rebar is also tracking losses in other commodities as investors sold riskier assets with no end in sight to Europe's debt troubles and after fresh data showed China's factory output shrank again in December.
The HSBC flash manufacturing purchasing managers' index, the earliest indicator of China's industrial activity, stood at 49 in December, a modest rise from November's 47.7 but pointing to a monthly contraction in activity nonetheless.Slower steel demand has curbed production of the building material and cut China's appetite for iron ore, with prices falling for a third straight day on Wednesday.
Growth in China's steel output and iron ore imports will slow next year as the world's top steel market keeps a tight grip on its property sector, putting pressure on iron ore prices, a Reuters poll showed.
Iron ore with 62 percent iron content declined 1.8 percent to $134.80 a tonne, cost and freight delivered to China, its lowest since Dec. 1, according to Steel Index .IO62-CNI=SI. That marked its steepest percentage drop since Nov. 28. "At present there are no buyers in the market. But it is difficult to say whether demand has dried up," said Dhruv Goel, managing director at iron ore trading firm SteelMint in India's eastern Orissa state.
Goel said while exports from India have been tight and will remain tight, there are ample cargoes in the spot market from Brazil and Australia.
Australia, Brazil and India are the world's biggest iron ore exporters.Brazil's Vale, the No. 1 iron ore miner, has been selling material into the spot market "at a significant discount to prevailing market levels," said Steel Index, noting that 240,000 tonnes of Brazilian 63.35-grade iron ore fines were sold at $135.7 a tonne, C&F, this week. Goel said a large Indian exporter had slashed an offer for 63.5/63-grade iron ore fines to $140 per tonne, but failed to conclude a deal.Sellers of Australian iron ore fines in China have cut prices by another dollar, with Pilbara fines at $134-$136 a tonne and Newman fines at $138-$140, said Chinese consultancy Umetal.