Chinese rebar futures slipped for a second straight session on Wednesday as investors worried about surplus risks, with steel output in the world's top metals consumer maintaining a robust pace of growth despite signs of weakening domestic demand.
The construction steel product's most-traded October contract on the Shanghai Futures Exchange edged down 0.2% to 3,585 yuan ($505.78) a tonne.
The benchmark has so far gained 10% in the second quarter, on track for its best quarterly performance in four, lifted by solid demand from an infrastructure-led recovery programme for the coronavirus-hit Chinese economy.
“At present, the output of finished products continues to rise, and there are signs of weakening … demand” that could lead to an oversupply, analysts at Sinosteel Futures Co Ltd said in a note.
The rate of weekly decline in China’s rebar inventory steadily slowed over the past three weeks, SteelHome consultancy data showed SH-TOT-RBARINV, supporting Sinosteel analysts’ observation that destocking of steel products has decelerated.
Apart from the onset of the rainy season in southern China, which will likely slow construction activity, the local resurgence of coronavirus infections could also dampen steel demand.
“Worries of a second wave of COVID-19 does put (China’s economic) recovery on tenuous ground,” commodity strategists at ING said in a note.
FUNDAMENTALS
* Scores of flights to and from Beijing were cancelled, schools shut and some neighbourhoods blocked off as officials ramped up efforts to contain a coronavirus outbreak that has fanned fears of wider contagion.
* Hot-rolled coil dropped 0.1% while stainless steel rose 0.2%.
* Steelmaking raw materials were also under pressure, with iron ore on the Dalian Commodity Exchange down 1.2% after a two-day advance.
* Iron ore on the Singapore Exchange fell 1.3% in afternoon trade.
* Coking coal and coke both dipped 0.5%.
Source:Reuters
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