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China's rebar futures steady as rising inventories weigh on sentiment
Reuters Reuters
Thursday July 06, 2017 11:44 PM
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* Stocks of construction steel piled up
* New released capacity increases rebar supply
BEIJING, July 7 (Reuters) - China's steel rebar futures were little changed on Friday after giving up earlier gains at the open because of increasing concerns of a supply glut and rising inventories.
"De-stocking in the steel market is slowing down. Especially the inventory of rebar has slightly rebounded and the increasing supply is filling the capacity gap left by low-quality steel," said analyst Cao Yang at Orient Futures in a note.
"Some mills have postponed their maintenance plans in a bid to ramp up output."
China has eliminated about 120 million tonnes of capacity by shutting more than 600 steel mills producing low-grade construction steel during the first half of the year. Analysts estimate that 20 million tonnes of steel output from electric arc furnaces in China will hit the market, either from plants previously shuttered because of low prices and newly built furnaces. "Considering a high level of steel supply, once demands show a waning signal, there will be a hidden trouble for future market." said the note.
By Thursday, stockpiles of rebar rose 327,000 tonnes to 5.04 million tonnes, compared with same period last year, according to data on the website of consultants Mysteel.
The most-active rebar on the Shanghai Futures Exchange was up 0.1 percent to 3,395 yuan ($499.22) a tonne at 0335 GMT.
However, the contract opened higher than the previous session close, rising to as much as 3,426 yuan per tonne earlier in the session.
Prices hit their highest since February 2014 on July 5 at 3,474 yuan.
Spot rebar prices were down 0.11 percent to 3,807 yuan a tonne on Thursday, according to Mysteel. The most-traded iron ore on the Dalian Commodity Exchange gained 2.2 percent to 476 yuan a tonne.
"The output ramp up in steel mills requires more iron ore," said a Beijing-based trader.
Stockpiles of imported iron ore at ports stood at 140.3 million tonnes last week, just below the record level of 141.5 million tonnes in previous week. ($1 = 6.8006 Chinese yuan renminbi)
(Reporting by Muyu Xu and Beijing Newsroom; Editing by Christian Schmollinger)