Iron Ore-Shanghai rebar falls on weak China data - Reuters

Wed Aug 1, 2012 3:44am EDT

  * Shanghai rebar closes down nearly 2 pct      * Traders remain concerned on China's economy      * Iron ore gains expected to be short-lived     (Updates Shanghai rebar price)      SHANGHAI, Aug 1 (Reuters) - Chinese steel futures fell  nearly 2 percent on Wednesday, snapping six consecutive sessions  of gains, as weaker-than-expected Chinese official manufacturing  data dented market confidence and rekindled worries about  sagging demand.      Steel prices in China, the world's top consumer, have been  heading south since early April as cooling economic growth  slashed demand from the construction and auto sectors, dragging  rebar futures to a record low last Monday.       China's official factory purchasing managers' index   inched down to 50.1 in July from 50.2 in June,  suggesting the sector is barely growing, while a rival HSBC  survey indicated the more market-sensitive private sector is  starting to recover.       "The economy is really weak. Before we see any bigger  recovery in the economy, the steel market will soon enter a weak  demand season from late November," said an iron ore trader with  a state-owned company's trading unit in Shanghai.        "We may only get a decent price increase in the second  quarter next year."      Steel demand in China typically falls in late November to  February as construction activities slow due to cold weather.      The most active rebar contract for January on the Shanghai  Futures Exchange fell 1.8 percent to 3,703 yuan ($580)  per tonne, within touching distance of a record low of 3,652  yuan hit on July 23.      Benchmark iron ore with 62 percent iron content  .IO62-CNI=SI rose to $117 per tonne on Tuesday, ending its  14-session losing streak, according to the Steel Index.       A few Chinese steelmakers are buying iron ore at small  volumes after prices of the steelmaking raw material slumped to  their lowest in more than two and a half years, but tepid steel  demand could rein in gains, traders said.      "End-user demand, whilst expected to pick up at the end of  the quarter, does remain weak. The slowly falling steel output  will also prevent any major rebound in iron ore prices in the  short term," Metal Bulletin Iron Ore Index said in a note.      China's government has said it would step up measures to  boost economic growth, including investments in key projects  sectors including railways, utilities, finance and health.          But traders said they were waiting for details of those  investments before taking any action amid expectations that the  market will be weak until the second quarter of next year.         "Local governments want to boost economic growth, but they  are short of cash for infrastructure investments, so steel  demand will be curbed," said a steel trader in Shanghai.               Shanghai rebar futures and iron ore indexes at 0723 GMT                                                                                       Contract                          Last    Change  Pct Change                       SHANGHAI REBAR*                   3703    -69.00       -1.83    PLATTS 62 PCT INDEX              117.5      0.00        0.00    THE STEEL INDEX 62 PCT INDEX       117      1.80        1.56    METAL BULLETIN INDEX            118.36      0.81        0.69                                                                                       *In yuan/tonne                                                                     #Index in dollars/tonne, show close for the previous trading day   ($1 = 6.3627 Chinese yuan)     (Reporting by Ruby Lian and Fayen Wong; editing by Miral Fahmy  and Himani Sarkar)  

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