MANILA: Chinese steel futures fell on Wednesday as changing weather conditions in top steel producer China added pressure on prices already undermined by government warnings against price manipulation and speculation.
The most-traded construction steel rebar for October delivery on the Shanghai Futures Exchange dropped as much as 3.1% to 4,800 yuan ($750.56) a tonne, the lowest since March 26.
Hot-rolled coil shed as much as 2.9% to 5,154 yuan a tonne.
The arrival of the monsoon season in China’s southern provinces at this time of the year and the scorching temperature in the north may slow down construction activity that has been the main driver of rebar demand over the past three months.
“The domestic construction...off-season is coming soon,” analysts at Huatai Futures said in a note.
However, the downward pressure on prices is not just weather-related.
“We do not rule out the possibility of (a rollout of further) regulatory policies,” Huatai analysts said, after China vowed to step up monitoring of commodity prices, and strengthen price controls on key materials including iron ore in a five-year plan.
China has moved to curb speculative trading that added fuel to a recent record-setting rally in prices of industrial commodities, seen by some analysts as an action to temper inflation driven by higher costs of raw materials.
Prices of iron ore, a key steelmaking ingredient, have dramatically dropped since hitting record highs on May 12.
The most-active September iron ore contract on the Dalian Commodity Exchange was down 1% by 0330 GMT, while the most-liquid June contract on the Singapore Exchange inched higher by 0.1% but off 22% from its peak.
Benchmark 62% iron ore’s spot price was steady at $192.50 a tonne on Tuesday but down 17% from a record high, SteelHome consultancy data showed. Shanghai stainless steel slipped 0.1%. Both Dalian coking coal and coke rose 0.3%.