MANILA: Chinese rebar steel futures dropped to their weakest in seven-and-a-half months on Tuesday, resuming their downturn as market focus returned to an oversupplied market in the world's top producer.
A 90-day ceasefire in the months-long trade war between the United States and China buoyed prices of steel and raw materials iron ore and coking coal on Monday, as risk appetite recovered. But strong supply pressured steel prices again.
The most-traded May rebar contract on the Shanghai Futures Exchange fell to its lowest since April 23 at 3,283 yuan ($479.80) a tonne and closed 1.3 percent up at 3,371 yuan.
Hot rolled coil - used in manufacturing - fell as far as 3,200 yuan a tonne, the lowest since March 29.
While demand for long steel products used in construction like rebar in places such as southern China remains firm, supply is far too high, said Richard Lu, analyst at CRU consultancy in Beijing.
"Because of overproduction, traders don't want to stock up on steel and that's undermining market sentiment," said Lu.
Stocks of rebar at Chinese traders fell to 2.94 million tonnes as of Nov. 30, the smallest since December 2017, according to data tracked by Chinese firm SteelHome. <SH-TOT-RBARINV>
Supply of flat products like hot rolled coil also remains high while demand from the manufacturing sector, including autos, is weak, said Lu.
Benchmark rebar prices have now fallen by a quarter since hitting a seven-year peak of 4,418 yuan in late August. Profit margins at Chinese steel mills shrunk sharply last month, spurring them to curb costs.
The May iron ore contract on the Dalian Commodity Exchange gained 1.8 percent to 472 yuan a tonne.
Coking coal climbed 2.1 percent to 1,394 yuan per tonne and coke surged 4.8 percent to 2,306.5 yuan.
Spot iron ore for delivery to China <SH-CCN-IRNOR62> jumped 3.1 percent to $66.90 a tonne on Monday, SteelHome data showed, tracking firmer futures.
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