MANILA: Chinese steel futures slumped more than 3% on Tuesday, plunging the most in nine months, due to heightened worries about a prolonged weakness in demand for the construction and manufacturing material.
The most-traded contract for hot-rolled coil, steel used in cars and home appliances, on the Shanghai Futures Exchange ended down 3.3% at 3,561 yuan ($502.06) a tonne, its biggest one-day fall since Nov. 26.
The most-active construction steel rebar contract, closed 3.7% lower at 3,281 yuan a tonne, also its worst day in nine months.
The Shanghai benchmarks have tumbled 10%-13% since July, pressured by seasonally weak demand and with the outlook for steel consumption clouded by the U.S.-China trade war.
The sell-off continued despite U.S. President Donald Trump's prediction on Monday of a trade deal with China following positive gestures by Beijing, which helped restore investor confidence after Monday's rout in global markets.
There is still "a degree of scepticism regarding the likelihood of any concrete near-term progress" in the U.S.-China trade talks, ANZ Research said.
The trade war between the world's two largest economies has dented global growth and its escalation last Friday following their latest tit-for-tat tariff actions had fuelled fears the world economy could slip into recession.
The downbeat outlook for steel demand, along with anti-pollution production curbs in China, dragged prices of steelmaking raw materials lower, including iron ore.
The most-traded January 2020 iron ore on the Dalian Commodity Exchange ended down 3.1% at 586 yuan a tonne, and has sunk 15% this quarter, after five consecutive quarterly gains.
"Coupled with the slowing steel market, an unexpected surge in (China's) iron ore imports in July and increase in port inventory crushed iron ore prices," said Helen Lau, analyst at Argonaut Securities in Hong Kong.
FUNDAMENTALS
* Benchmark 62% iron ore for delivery to China <SH-CCN-IRNOR62>, as assessed by SteelHome consultancy, rebounded to $87.50 a tonne on Monday, after hitting its lowest in nearly five months at $86.50 last week.
* In the Singapore Exchange, the front-month September 2019 iron ore contract was down 2.7% at $81.44 a tonne in late trade.
* Imported iron ore inventories at China's ports rose steadily for six straight weeks, hitting 124.65 million tonnes, as of Friday <SH-TOT-IRONINV>, data from SteelHome showed, the highest since the end of May this year.
* The spread between seaborne iron ore heading to China and iron ore at China's ports has widened to the highest in at least two years, following an increase in shipments from Australia and Brazil as disrupted mines gradually come back on track.
* Coking coal futures fell 1.3% at 1,298.50 yuan a tonne while coke lost 1.8% to 1,875.50 yuan.
* China's housing market is expected to slow this year with sales forecast to drop, as Beijing steps up efforts to scrutinise banks and provincial governments to keep a lid on lending and prices, a Reuters poll showed.
* China's yuan weakened for the ninth straight session on Tuesday, plumbing new 11-1/2-year lows, as dramatic twists in the Sino-U.S. trade war left investors sceptical of the chances of a near-term deal.
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