BEIJING: Ferrous metals futures slumped on Monday, pressured by mounting supply and weak downstream demand in top consumer China.
Improved margins prompted a few Chinese steelmakers to ramp up production, adding pressure to an already tepid market as the latest heat wave hindered outdoor construction activities and further dampened demand.
Rebar on the Shanghai Futures Exchange lost 1.24%, hot-rolled coil shed 1.37%, wire rod fell 2.25% and stainless steel dipped 0.71%, as of 0700 GMT.
The daily crude steel output in China was estimated at 2.95 million metric tons during June 11-20, up 1.11% from the previous 10-day period, data from the China Iron and Steel Association showed. The surveyed daily transaction volumes of construction steel products declined to 301,000 tons on June 25, a working day in China, down 12.7% from the previous survey and down 37% from previous Friday, according to data from consultancy Mysteel.
Weakness in the steel sector permeated through the raw materials market, weighing on trader sentiment. The most-traded September iron ore on the Dalian Commodity Exchange (DCE) ended daytime trading 0.44% lower at 797 yuan ($110.21) per ton, the lowest since June 13. The benchmark July iron ore on the Singapore Exchange was 0.42% higher at $109.65 per ton.
Still, hot metal production was on the uptrend, providing some support to iron ore in the near term, analysts at Everbright Futures said in a note.
Average output of hot metal, a blast furnace product and typically used to gauge iron ore demand, among the surveyed steel mills grew for the third consecutive week to about 2.46 million tons per day in the week ended June 21, up 1.4% from previous survey result, Mysteel data showed.
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