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Steel futures dip on global growth concerns

Shanghai steel futures turned lower on the first day of trading for 2019 on Wednesday after disappointing data from China stoked investor worries about global economic growth.

Prices of steelmaking raw materials also ended the session weaker, with iron ore snapping a run of three positive sessions and coking coal hitting its lowest in more than four weeks.

China’s factory activity contracted for the first time in 19 months in December as domestic and export orders continued to weaken, a private survey showed on Wednesday, broadly tracking an official survey released on Monday.

China’s weakness spilled over to other Asian economies, as factory activity weakened across the region in December amid the Sino-U.S. trade war and a slowdown in Chinese demand.

The most-active rebar contract on the Shanghai Futures Exchange closed down 0.5 percent at 3,382 yuan ($493.44) a tonne. Hot rolled coil dropped 1.5 percent to 3,294 yuan.

Prices of rebar, used in construction, ended 2018 up 12 percent from a year earlier as China’s crackdown on pollution forced mills to reduce production, curbing supplies in the world’s top consumer.

“Macro news out of China continues to come in on the weaker side and this is undoubtedly weighing on both ferrous and nonferrous valuations,” said INTL FCStone commodity consultant Edward Meir.

The pace of reform in China will not stagnate and the country will open its door wider still to the outside world, President Xi Jinping said on Monday in his New Year message. But he warned of challenges ahead for the world’s second-biggest economy.

The most traded coking coal on the Dalian Commodity Exchange fell 2.5 percent to 1,145.5 yuan a tonne. Iron ore dropped 0.6 percent to 489.5 yuan and coke eased 0.4 percent to 1,876.5 yuan.

Spot iron ore for delivery to China SH-CCN-IRNOR62 was steady at $72.60 a tonne on Dec. 29, before the new year holidays, according to SteelHome consultancy.

“Beijing has announced steps to step up spending and lower taxes going into 2019 in order to fight the growing slowdown, but the initiative still falls well short of the rollouts we saw in 2015/16 and in 2008/2009,” Meir said in a note.

Source: Reuters

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