CHINESE steel-related commodities futures dived yesterday, erasing last week’s rally as investors felt the previous gains outpaced physical demand for steel in China, the world’s top producer.

    The October benchmark rebar contract on the Shanghai Futures Exchange and September iron ore contract on the Dalian Commodity Exchange deepened losses in the afternoon trading, hitting downside limit of 6 percent by close.

    Rebar was at a one-week low of 2,362 yuan (US$352.61) a ton and iron ore ended the day by 431 yuan a ton.

    “Futures have surged too quickly last week, widening the gap between spot and promoting some mills and funds to take short positions,” said Bai Jing, an analyst with Galaxy Futures in Beijing.

    Futures rose to more than 100 yuan a ton higher than spot prices last Friday, so futures today were retreating to keep pace with the spot prices, said Bai.

    “Record high output and a multi-year low of steel product inventories at some market warehouses suggested consumption still remained firm,” she said.

    Despite the steady steel demand, some warned that the spike was close to an end in near-term as prices already factored in positive macro-economic data for June issued last week and were likely to ease off from high levels.

    Prices climbed 4.6 percent last week driven by a mandated steel output cut in the key-producing region of Tangshan between July 12-31 and the expectation of easing monetary policy amid better-than-expected macro-economic data.

    Steelmaking raw materials followed rebar, a material used mainly for construction, quickened the fall in the last few trading hours.

    Dalian coke futures slumped 5.3 percent and coking coal dropped 3.8 percent.

    China’s average daily crude steel output reached a record high of 2.316 million tons in June as firm demand spurred mills to produce more of the alloy.

    (SD-Agencies)