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PrintChina steel futures hit a record low on Wednesday before paring losses at the close, dogged by weakening demand in the world's top consumer that has pushed down the price of raw material iron ore to levels last seen in 2009.
The most-traded rebar for January delivery on the Shanghai Futures Exchange hit a session trough of 3,327 yuan ($520) a tonne, its lowest since the bourse launched rebar futures in 2009. It closed down 0.4 percent at 3,443 yuan.
That marks the 13th straight day of declines for rebar which, with its loss of almost 10 percent so far in August, is on course for its worst month in nearly a year.
Demand for rebar, or reinforcing bar, mostly used in construction, is taking a hit as China's economy slows down this year to what may be its weakest pace in a decade.
"We believe that China is in the middle of a considerable inventory adjustment. While there has been some suggestion that steel mills are destocking we believe this could take time," Deutsche Bank said in a note.
Between March 2 and Aug. 24, the price of rebar in south China has fallen 14 percent to $607 a tonne, while the supply of steel stocks has dropped to 5.83 days from 7.02 days, Commonwealth Bank of Australia said.
The sustained drop in Chinese steel prices further curbed even appetite for iron ore, with the price of benchmark 62-percent grade .IO62-CNI=SI at $94.80 a tonne on Tuesday, the lowest since November 2009, according to data provider Steel Index.
"Sentiment is so bearish, and mills are just in wait and see mode right now. If someone's buying, they're asking for a big discount," said an iron ore trader in Shanghai.
Price offers for imported iron ore cargoes in China dropped by a further $2 per tonne on Wednesday, said Beijing-based industry consultancy Umetal.
Credit rating agency Fitch said the price weakness in both steel and iron ore should continue through to the end of the first quarter of 2013.
"Fitch believes that the prices of steel and related raw materials - including iron ore and coking coal - are unlikely to rebound in the short term, but rather are looking for new equilibriums that take into account the increasing supply of raw materials and demand growth for steel which is likely to be slower," it said.(Source: Reuters)
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