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Shanghai steel futures fell for a second straight session on Wednesday as concerns over slowing Chinese demand for the construction and manufacturing material eclipsed moves to reduce its production.
Construction steel rebar on the Shanghai Futures Exchange ended daytime trading 0.3% lower at 5,658 yuan ($869.82) a tonne, while hot rolled coil slumped 1.6% to 5,879 yuan a tonne.
Stainless steel SHSScv1 shed 1.8% to 19,120 yuan a tonne.
Wood Mackenzie senior economist Yanting Zhou said China’s slowing industrial production growth, and lacklustre investment in manufacturing and infrastructure are expected to have a negative impact on domestic demand for metals.
Profit growth at China’s industrial firms slowed for the fourth straight month in June, as high raw material prices weighed on factories’ margins.
“Steel demand is likely to take a greater hit compared to other metals,” Zhou said, citing in particular the “significant” slowdown in transportation infrastructure investment.
Supply constraints, however, have prevented a dramatic pullback in steel prices from record peaks seen in May, as China’s accelerated de-carbonization efforts prompt mills to reduce their output.
China aims full-year steel production to not exceed the 2020 volume, which implies a significant output cut in the second half after first-half growth of nearly 12%.
On the Dalian Commodity Exchange, key steelmaking ingredient iron ore edged up 0.2% at 1,137.50 yuan a tonne after trading in a narrow range.
Iron ore on the Singapore Exchange was up 1.4% at $195.75 a tonne by 0711 GMT, with a marked recovery in steel profit margins in China lifting sentiment.
Dalian coking coal DJMcv1 rose as much as 2.4% to contract-high 2,205 yuan a tonne, while coke DCJcv1 advanced 2.9% to 2,955 yuan a tonne, its strongest level since May 10, both propped up by tight supply concerns.