MANILA (Reuters) - Chinese iron ore futures dropped more than 1 percent on Wednesday as a slide in steel prices dragged down the raw material, although firm steel demand in the world’s top consumer of the metal is expected to cap any losses.
The fall in both commodities came after recent rapid gains that stretched the winning streak in rebar steel, used in the construction business, to a fourth straight month in August, and in iron ore to a third consecutive month.
“Prices have gone up quite a lot so sentiment is very fragile,” said Helen Lau, analyst at Argonaut Securities in Hong Kong. The sell-off may be due to short-term traders cashing in on recent market gains, she said.
The most-active rebar on the Shanghai Futures Exchange closed down 0.8 percent at 3,868 yuan ($587) a ton, but off the day’s low of 3,808 yuan.
The most-traded iron ore on the Dalian Commodity Exchange ended 1.2 percent lower at 556 yuan per ton after falling as far as 543 yuan, its weakest level since Aug. 17.
Lau said steel demand in China remains supported by steadily growing investment in the country’s property sector, even though the latest data showed a slower increase in fixed-asset investment in the first seven months of 2017.
Stockpiles of rebar at Chinese traders stood at 3.88 million tons as of Aug. 25, still less than half of this year’s peak of 8.4 million tons reached in February, according to SteelHome consultancy.
That indicated strong demand for rebar, traders and analysts say.
Inventory of iron ore at China’s ports have also been declining, dropping for a fourth straight week to 133.45 million tons last week, the lowest since May.
Iron ore for delivery to China’s Qingdao port slipped 1 percent to $76.36 a ton on Wednesday, according to Metal Bulletin.
Reporting by Manolo Serapio Jr.; Editing by Kenneth Maxwell and Amrutha Gayathri