Iron ore and steel futures in China shook off early gains to extend losses for a fourth day running on Thursday, underlining investor worries over plentiful supply of both commodities and lean demand.
The decline pushed rebar steel to its lowest in more than three months and iron ore to near its weakest since January.
China’s crude steel output reached a record 72 million tonnes in March as mills anticipated brisk seasonal demand starting this month. But demand has been slow so far, leaving mills and traders with hefty inventories, traders said.
“I’m not very sure whether there’s enough new demand to match this big production of steel,” said a Shanghai-based trader.
The most-active rebar on the Shanghai Futures Exchange was down 1.4 percent at 2,798 yuan ($406) a tonne by midday break. The construction steel product initially hit a session peak of 2,928 yuan before falling to 2,797 yuan, its weakest since Jan. 10.
Iron ore on the Dalian Commodity Exchange dropped 1.8 percent to 465.50 yuan per tonne, near Tuesday’s three-month low, after rising as much as 2.8 percent earlier.
There is no rush among Chinese mills to buy iron ore, said the Shanghai trader. “Mills have more choices because there’s plenty of port stocks,” he said.
Iron ore piggybacked on the rally in steel prices early this year and steel’s consequent retreat has dragged down iron ore as well.
The steelmaking raw material is similarly hit by a glut, with stockpiles at China’s ports staying near the highest level in more than a decade as arrivals continue.
China’s iron ore imports reached 95.56 million tonnes in March, the second-highest monthly volume on record.
Stockpiles of imported iron ore at China’s major ports stood at 130.4 million tonnes on April 14, according to data tracked by SteelHome consultancy.
That is not far below the 132.45 million tonnes where it stood on March 24, the highest since SteelHome began tracking it in 2004. That volume would make about 95 million tonnes of steel, enough to build 12,960 replicas of the 324-metre (1,063-foot) high Eiffel Tower in Paris.
Weaker futures could thwart the rebound in spot iron ore prices. Iron ore for delivery to China’s Qingdao port climbed 2.2 percent to $64.60 a tonne on Wednesday, according to Metal Bulletin, after a two-day drop.