* Weak China CPI, PPI point to sharply cooling economy
* Iron ore unchanged as buying interest stalls
SINGAPORE, Dec 9 (Reuters) - Shanghai rebar futures dropped for a second day on Friday, weighed down by a weak outlook for steel demand in top market China after fresh data suggested the Chinese economy was cooling off rapidly.
China's annual inflation rate slid to 4.2 percent in November -- the lowest level in more than a year -- from 5.5 percent in October, fuelling expectations of further monetary policy easing to fight deteriorating domestic and international economic conditions.
Producer inflation in the world's second-largest economy fell steeply to 2.7 percent in November from 5.0 percent in October. The most-traded May rebar contract on the Shanghai Futures Exchange eased 0.3 percent to 4,162 yuan a tonne by the midday break, and was nearly flat on week.
"Steel demand is really slow, so there's no real interest for iron ore at this point," said an iron ore trader in the port city of Rizhao in China's eastern Shandong province.
Iron ore with 62 percent iron content was unchanged at $139.40 a tonne on Thursday, cost and freight delivered to China, according to Steel Index .IO62-CNI=SI.
"We are offering our cargoes to all our customers, including traders and mills, but most of them choose to wait and see," said the Shandong-based trader, adding he was only able to sell 10,000 tonnes of iron ore this week, versus at least 50,000 tonnes a week when the market rallied in November.
"Chinese steel mills are generally not eager to replenish stocks, with many expecting further price falls," Steel Index said in a note. China's average daily crude steel output in late November rose for the first time since late September, although doubts remain about underlying steel demand amid a slowing economy and a government clampdown on the property sector still in place.
Average daily steel output in China stood at 1.685 million tonnes on Nov. 20-30, up 1.3 percent from mid-November, data from the China Iron and Steel Association showed.
The end-November run rate puts China's annualised steel output at 615 million tonnes, down from a record 627 million tonnes in 2010.
China's crude steel output stood at 581 million tonnes in January to October, up 11 percent from a year ago.
"End demand remains challenged by weak new residential construction activity, and slowing growth in steel demand more broadly," Commonwealth Bank of Australia said in a note.
But with access to trade finance improving and steel inventories remaining relatively low, the Australian bank said "a moderate demand recovery and/or restocking cycle cannot be ruled out in the short term".
Shanghai rebar futures and iron ore indexes at 0459 GMT
Contract Last Change Pct Change
SHANGHAI REBAR* 4162 -14.00 -0.34
PLATTS 62 PCT INDEX 141.25 -0.25 -0.18
THE STEEL INDEX 62 PCT INDEX 139.4 0.00 0.00
METAL BULLETIN INDEX 139.75 -0.16 -0.11
*In yuan/tonne
#Index in dollars/tonne, show close for the previous trading day
(sourced Reuters)
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