August 29, 2019 / 8:08 AM / 2 months ago

UPDATE 1-China rebar extends slump on cloudy outlook; spot iron ore sinks

* Rebar down for 4th day, hot-rolled coil up 0.2%

* DCE iron ore holds ground, SGX iron ore slips

* Benchmark spot 62% iron ore hits 5-1/2-mth low (Updates with closing prices, graphic)

By Enrico Dela Cruz

MANILA, Aug 29 (Reuters) - Rebar steel futures in China gave up early gains and closed at their lowest in five months on Thursday, extending losses into a fourth session, as demand prospects for the construction material remained uncertain.

The most-active rebar contract, with January 2020 expiry, ended down 0.6% at 3,266 yuan ($460.47) a tonne on the Shanghai Futures Exchange, its weakest close since April 2.

Hot-rolled coil, the steel used in cars and home appliances, recovered from a three-day fall, gaining 0.2% to close at 3,563 yuan a tonne.

Steel glut in China and seasonally weak domestic demand for the metal weighed on prices in recent weeks, including those of steelmaking raw materials.

The slump in steel prices along with higher cost of raw materials — iron ore still trades above 2018 price levels despite its pullback from five-year highs — are putting strain on the profitability of Chinese steel mills.

Some of them have thus decided to reduce output to prop up prices and curb production costs, while waiting for steel demand to pick up.

“For now, maybe we will see the market getting stable for a short period,” a Shanghai-based trader said. “At the moment, many market players are just doing nothing except monitoring the market.”

Some steel mills, he said, have taken a cautious stance in buying raw materials. “Some of our clients told us they are not going to buy any spot (iron ore) cargoes at the moment while prices are still volatile.”

There is, however, still some downstream demand at present that is providing support for steel prices, the trader said.

“But we need to see the situation in the next few weeks,” he said. “Normally, the period between end-September and November is when some new demand comes into the market.”

FUNDAMENTALS

* The most-traded iron ore on the Dalian Commodity Exchange , also for delivery in January 2020, ended steady at a 2-1/2-month low of 580 yuan a tonne.

* Benchmark 62% iron ore for delivery to China SH-CCN-IRNOR62, as assessed by SteelHome consultancy, fell further on Wednesday, hitting a 5-1/2-month low of $85 a tonne. It scaled a five-year peak at $126.50 on July 3.

* “We may see some support for iron ore between $80 and $90,” the steel trader in Shanghai said.

* On the Singapore Exchange, the front-month October 2019 iron ore contract was down 1.4% at $77.33 a tonne in late trade.

* There were market talks about China’s top steel-producing city of Tangshan planning to loosen production restrictions in September, a move that could help boost iron ore demand.

* However, there are expectations as well that Beijing will move to clear its skies ahead of the National Day celebrations in early October, which could possibly mean full suspension of smog-causing steel production.

* Other steelmaking inputs also held ground after recent falls, with Dalian coking coal down just 0.1% at 1,290.50 yuan a tonne, while coke also slipped 0.1% to 1,857.50 yuan.

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($1 = 7.0928 yuan)

Reporting by Enrico dela Cruz; editing by Uttaresh.V and Sherry Jacob-Phillips

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