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Chinese steel prices drift lower, iron ore gains strength


Chinese spot steel prices have been drifting lower since early May following strong run last month, as downstream users only made purchase based on short-term demand while steel production remained in glut. 
 
Spot prices of rebar, high-speed wire, hot-rolled and cold-rolled coil and middle plate dropped by 0.8%, 0.7%, 0.7%, 0.6% and 0.5%, respectively over the week of May 5-10. 
 
The average price of China's main rebar products came in at 4,227 yuan/t in the first trading week after the May Day holidays, falling 20 yuan/t from the level prior to the holidays; the average price of hot-rolled coil also slid 16 yuan/t to 4,058 yuan/t, data showed. 
 
Prices of major middle plate products averaged 4,130 yuan/t in the country, down by 11 yuan/t from the pre-holiday level. 
 
Even though weaker offers by steelmakers have slightly boosted steel trades, end users kept replenishment on a need-to basis, which resulted in a shrink of steel profits. 
 
Steel production, however, remained at high tilt in most hubs in China, and output restriction in top steel city Tangshan turns out to be lenient than expected, said sources, adding it weighed on steel market significantly. 
 
Capacity utilization of hot-rolled coil ranked first at 86.2% last week, while that of rebar and cold-rolled coil stood at 82.4% and 80%. 
 
Inspired by strong steel market in April, some steel makers ramped up buying of iron ore, a main raw material in steelmaking, after the May Day holidays owing to declined stocks. Domestic and imported iron ore prices both edged up on good demand. 
 
As of May 9, price of imported 62%-Fe iron ore was $95.15/t, rising $0.55/t from a week earlier, data showed. 
 
Industry insiders expected domestic steel prices to face downside pressure in the days ahead given slow destocking pace at steel mills and in the whole country impacted by brisk production and waned demand. 
 
Inventories of rebar, hot-rolled and cold-rolled coil and middle plate logged small declines of 0.5%, 4%, 0.7% and 0.2% over May 5-10, while inventory of wire even rebounded 0.3%. 
 
But a sharp decline is also less likely to emerge due to firm iron ore prices. 
 
Source:sxcoal

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