Iron ore prices dipped further overnight, with little sign that Chinese buyers would risk big purchases, faced with uncertain demand and the risk of steel capacity cuts for environmental reasons when a global summit is held in Beijing in November.
Benchmark 62 percent iron ore for immediate delivery into China .IO62-CNI=SI fell 0.25 percent on Wednesday to $78.6 per tonne, its fifth consecutive daily decline wiping out the gains made during a brief rally in the middle of the month.
However, steel and iron ore futures continued to rebound on Thursday, with the most traded rebar contract on the Shanghai Futures Exchange ending the day at 2,590 yuan ($423.6) per tonne, up 1 percent.
The most active iron ore contract on the Dalian Commodity Exchange also rose 2.3 percent to 536 yuan, reflecting improved sentiment after China's cabinet announced measures on Wednesday designed to stimulate consumption in sectors such as housing and new energy.
Some steel mills in Hebei, China's top steel-producing province, have been asked to reduce or suspend production during an Asia-Pacific Economic Cooperation summit in November to help improve air quality in Beijing.
Traders initially believed the capacity reduction would help thin supplies and provide support to steel prices, which have been hovering close to record lows.
But with little positive news to drive demand and the winter consumption lull approaching fast, few in the industry expect any sustained improvement in the near term.
"The situation is expected to remain like this for some time - there will only be small price changes and no big surprises," said Xu Zhongbo of Beijing Metal Consulting, who works with Chinese steel mills.
"Debts are the big problem - the firms with no debts are surviving and even making some money, but those having to pay back heavy loans are struggling," he added.
Confidence in China's steel sector, by far the world's largest, has been weak this year, with many enterprises operating in the red as a result of plummeting prices. The priority for many smaller firms has been to survive as long as possible in the hope that their rivals would go bankrupt first.
The China Iron and Steel Association noted some signs of improvement in its third-quarter report, with profits at member companies rising 71 percent from the same period last year. But a quarter of its members were still making losses, it said.
There were also mixed signals from the latest round of earnings reports.
Major state-owned producers like Hebei Iron and Steel and Angang Steel reported better profits in the third quarter but smaller firms tended to fare worse, with Lingyuan Iron and Steel and SGIS Songshan both posting net losses.
Source: Reuters |
