Chinese steel futures slipped for a second day on Wednesday as investors locked in recent gains, though the outlook for the commodity remained firm as declining traders' stockpiles pointed to a pick-up in demand. Inventory of rebar among Chinese traders had fallen in the past two weeks, after hitting a nearly three-year high of 8.3977 million tonnes in mid-February, according to SteelHome consultancy. It stood at 7.8362 million tonnes as of March 3.
"We think end-user demand is picking up at the moment because of improving construction activity," said CRU consultant Richard Lu in Beijing. Lu said the drop in futures prices reflected profit-taking among traders with long positions.
"And perhaps because current margins at mills are high, mills may lift production to boost profits, implying more supply," he said. CRU's estimates put margins of Chinese rebar producers at around $36 a tonne, compared with $10-$13 in early January. The most-active rebar on the Shanghai Futures Exchange closed down 1.5 percent at 3,425 yuan ($496) a tonne. The construction steel product touched a three-year peak of 3,648 yuan on February 27. Amid strong domestic demand, China's steel exports fell to a three-year low of 5.75 million tonnes in February, customs data showed. Iron ore on the Dalian Commodity Exchange ended flat at 661.50 yuan a tonne, after three days of declines.
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