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||China rebar hits record low, more pressure on iron ore
Chinese steel futures dropped for a fourth session to hit an all-time low on Tuesday, reflecting pressure on demand from a weak property sector and hefty supply as markets reopened after a holiday weekend.
Iron ore futures in Dalian also slipped for a fourth straight trading day, hovering near their lowest since their October launch, weighing on spot prices that have already fallen by almost a third this year.
The growth in China's housing prices slowed to a near one-year low in April, while property investment also lost steam in the first four months of the year as developers feel the pinch from slowing sales and rising borrowing costs.
While stocks of steel products among Chinese traders have been falling, those held by producers have been rising, suggesting an uncertain outlook for demand has been keeping traders from replenishing their inventory, said Zhou Ting, analyst at Jinrui Futures in Shenzhen.
"Given the risks in the real estate market, traders and end-users are not willing to increase their stocks and this is putting pressure on the mills," said Zhou, adding those risks had overshadowed recent signs of recovery in China's manufacturing sector.
China's factory sector turned in its best performance in four months in May as export orders improved although activity still contracted, a private survey showed on Tuesday. A separate government gauge hit a five-month high in May.
The most-active rebar for October delivery on the Shanghai Futures Exchange touched a session low of 3,042 yuan ($490) a tonne, the lowest for a most-traded contract since the bourse launched the product in March 2009.
It was down 0.6 percent at 3,050 yuan a tonne by 0156 GMT.
Stockpiles of five major steel products, including rebar, held by Chinese traders dropped 3.5 percent from a week ago to 14.12 million tonnes last week, according to industry consultancy Steelhome. The stocks have fallen for the past 13 weeks.
Inventory of these products among Chinese mills, however, rose to 14.99 million tonnes last week from 14.29 million tonnes in the previous 10-day period, according to Mysteel.
Iron ore for delivery in September on the Dalian Commodity Exchange fell 1 percent to 678 yuan a tonne, a tad above the contract low of 677 yuan reached on Friday.
Chinese markets were shut on Monday for a public holiday.
Iron ore for July delivery on the Singapore Exchange slid 1.2 percent to $92.47 per tonne.
The weakness in China's steel market, along with brisk supply, has dragged down iron ore with spot prices languishing below $100 per tonne since piercing that support level on May 19.
Chinese steel mills are cutting back on long-term iron ore contracts in favour of cheaper spot cargoes, confident that beaten-down prices are unlikely to rebound amid the first global ore surplus in a decade.
Iron ore for immediate delivery to China .IO62-CNI=SI was little changed at $92.10 a tonne on Monday from Friday's $91.80, which was its lowest since Sept. 7, 2012, according to Steel Index which compiles the data.
Friday's 4-percent plunge was iron ore's biggest single-day slide since slumping by more than 8 percent in early March. The raw material ended May down 13 percent, falling for a sixth straight month, which was its longest losing streak on record.
"High cost domestic iron ore producers in China are now feeling the pinch. If prices remain depressed under $100/tonne, these mines will be forced to curb supply," Australia and New Zealand Bank said in a note.
($1 = 6.2473 Chinese Yuan Renminbi)