Shanghai rebar steel futures fall almost two percent

Shanghai rebar steel futures fell almost 2 percent on Thursday as investors locked in gains from a recent rapid climb in prices to a seven-year peak that was driven by China's production curbs aimed at fighting pollution. Hot rolled coil prices also retreated further from a record high, but coke futures sank nearly 5 percent at one stage following a Chinese media report on Wednesday that regulators were probing the China Coking Industry Association for allegedly monopolising prices of the steelmaking raw material. China's State Administration for Market Regulation denied it had given any such instruction.
The pullback in prices came as the United States and China escalated their trade war on Thursday, implementing 25 percent tariffs on $16 billion worth of each other's goods, even as mid-level officials from both sides resumed talks in Washington.
The recent rally in steel prices followed market talk last week that Tangshan, the top steelmaking city in China, was considering bringing forward the start of planned winter production cuts by two months to September 1, meaning there would be no gap following summer cuts due to end on August 31.
But Tangshan's Iron and Steel Association and two steel mills in the city told Reuters that they had not been issued such orders by the government.
"We have not had confirmation from local government officials in Tangshan so market sentiment will be quite volatile," said Kevin Bai, analyst at CRU consultancy in Beijing.
"And because prices have increased so dramatically, there has to be some correction."
The most actively traded January rebar on the Shanghai Futures Exchange closed down 1.7 percent at 4,280 yuan ($623) a tonne. The construction steel product, which has gained by a quarter this year, touched a seven-year high of 4,418 yuan on Wednesday.
Hot rolled coil, used in manufacturing, dropped 1.6 percent to 4,226 yuan per tonne, having hit an all-time high of 4,369 yuan on Tuesday.
"Demand is also relatively low because prices have risen so much, so some end-users have hesitated with their purchases," said Bai.
Coke led the slide among steelmaking ingredients, with the January contract on the Dalian Commodity Exchange falling as much as 4.7 percent intraday, before settling 4.2 percent lower at 2,504.50 yuan a tonne.
The price of the processed form of coking coal, whose production is also covered by China's anti-pollution restrictions, hit a record high of 2,720.50 yuan on Friday. Coking coal dropped 2.7 percent to 1,295.50 yuan and iron ore slid 1.3 percent to 487 yuan.