Chinese steel futures extended losses on Friday as frigid winter weather curbs the demand for construction activities by downstream users. The most-traded steel rebar contract on the Shanghai Futures Exchange slipped 0.3 percent to 3,798 yuan ($586.16) a tonne, dipping for a second session.
“The steel market is currently at a low season, as construction sites in the northern part of country halt for cold weather,” said Bai Jing, steel analyst, Galaxy Futures.
She expected tepid consumption to last until late February, when the weather will start to warm and construction workers will return from holidays over China’s Lunar New Year.
Spot steel fell 0.8 percent to 4,437.83 yuan a tonne on Thursday, according to data from consultants Mysteel.
“Traders are losing interest in stocking steel products at the moment,” said Bai, but added that restocking demand may be boosted if spot prices continue to fall.
However, BMI Research expects steel prices to ease in the coming months as a thinning project pipeline in the infrastructure and construction industries in China continues slowing demand for industrial metals and dragging on prices.
Iron ore prices also edged down along with steel products after a small pick-up in early trading, curbed by increasing supplies and waning demand despite recent bouncing utilisation rate at steel mills.
Inventory of iron ore at ports rose 1.87 million tonnes to 148 million tonnes as of Jan.2 from a week earlier, highest level since at least 2012, data complied by Steelhome showed. In Hebei province, the heartland of China’s steelmaking industry, the utilisation rate at steel mill blast furnaces edged up to 52.06 percent as of Jan.5 from the prior week, hitting its highest since Nov. 24, Mysteel data showed.
The top steelmaking city of Tangshan, however, was put on a second-level pollution alert effective starting on Thursday. Steel mills that use wet process desulphurizing were ordered to cut sintering and shaft furnace production by 50 percent. The most-active iron ore futures on the Dalian Commodity Exchange closed 0.1 percent lower to 538.5 yuan a tonne.
Iron ore for delivery to China’s Qingdao port rose 1.6 percent to $74.97 a tonne on Thursday from a day ago, according to Metal Bulletin.