Steel Futures at SHFE heading for biggest drop in last 3 months

- 01 May 2010

Bloomberg reported that steel futures in Shanghai are poised for the largest monthly decline in three months on concern demand may ebb in China, the largest consumer and producer, as the government moved to cool its real estate market.

Steel reinforcement bars for October delivery dropped as low as CNY 4,577 per tonne on the Shanghai Futures Exchange, the lowest price since March 8. The most active contract has dropped 3.2% this month, the steepest loss since January.

Ms Xie Shuguang an analyst Dongguan Hualian Futures Co from Guangdong said “The short term outlook for steel has been hurt by the measures the government has taken to curb property speculation. Stockpiles have fallen but considering we’re in the peak demand season now, they are not falling as fast as expected.”

Ms Xie added that “From a longer term perspective, the controls will allow the property market to continue growing at a healthy pace, which is bullish for steel prices.”

Inventories of steel rebar in warehouses monitored by the Shanghai Futures Exchange have declined 16% from 192,009 tonnes in February, the highest level since futures started trading in August 2009.

Chinese government has in the past two weeks raised mortgage rates and down-payment ratios, barred lending for third-home purchases and ordered tighter scrutiny of developers’ financing to restrain property prices that surged at a record 11.7% in March.

(Sourced from Bloomberg)