Chinese steel futures edged up in light trade on Thursday ahead of the Lunar New Year holidays, while iron ore barely moved after a three-day advance spurred by a disruption in supply from Rio Tinto's export facility in Australia.
The most actively traded May rebar on the Shanghai Futures Exchange was up 0.7 percent at 3,551 yuan ($524.90) a tonne after some losses in the two previous sessions. Trading volume, however, is the smallest in two weeks at 2.26 million tonnes. Hot rolled coil was at 3,458 yuan, up 1 percent. "Trading is getting slower this week ahead of the Chinese New Year holidays (in early February)," a Shanghai-based trader said. "I don't think there will be much change in the market, especially from next week."
For the moment, prices will likely stay at current levels, with no additional demand for steel expected until after the holidays, the trader said. While there has been some buying support for steel since the start of the year on hopes that Chinese moves to stimulate its slowing economy will boost demand, the pressure of oversupply persists.
China's iron and steel association has said that since 2016, the country has eliminated nearly 300 million tonnes of outdated steel production capacity and low-grade steel capacity, but around 908 million tonnes still remain. The country's steel consumption, meanwhile, may fall to 800 million tonnes in 2019 from 820 million tonnes last year, dragged down by waning demand in the property, automobile and energy sectors, the China Metallurgical Industry Planning and Research Institute said last month.
The most traded iron ore, for May delivery, on the Dalian Commodity Exchange was up 0.2 percent at 513.5 yuan a tonne, after a 0.9-percent gain over the last three sessions amid ongoing supply-related issues. "The impact of the disruption at Cape Lambert (export terminal), which has been partially shut by Rio Tinto due to a fire, continues to keep traders anxious," ANZ Research said in a note.
Rio Tinto has declared force majeure on iron ore shipments to some customers following the fire last week. Coking coal traded almost flat at 1,231.5 yuan a tonne, while coke was up 0.7 percent at 2,034.5 yuan.
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