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PrintChinese steel futures fell more than 1 percent to a record low on Friday, as the European Central Bank disappointed investors looking for imminent action to boost growth and combat the euro zone's debt crisis.
The most-traded January Shanghai rebar futures contract touched a low of 3,631 yuan ($570) a tonne at the market open, down 1.1 percent from the previous day, though had rebounded to close at 3,672 yuan.
Asian markets mostly fell on Friday, with risk aversion growing on the ECB's inaction.
Steel prices in China have dropped 17 percent from early April as cooling growth in the world's second-largest economy and the protracted euro zone crisis hit demand, forcing some steel makers to step up maintenance in order to cut output.
"The actual production cuts by Chinese steel mills are too low to support prices when demand remains poor, particularly during a weak summer season," Lu Xiaohua, an analyst with Everbright Futures in Shanghai said.
"Mills will not be desperate to slash output until prices fall to their current marginal costs of 3,500 yuan. And any pro-economic measures may trigger a rapid recovery in production, with the overhang capping gains in prices."
Relatively strong readings for China's purchasing managers index (PMI) reflected long-term optimism the country's maturing economy will support more services and consumption.
A sub-index tracking the construction services industry rose by 2.3 points to 60.4, reflecting a loosening of the tight grip on the property sector, one of the largest steel consumers.
Analysts and traders said these factors would take several months to filter through to the steel industry, however, and that steel demand would remain faltering without an imminent large-scale investment into infrastructure.
Iron ore with 62 percent iron content .IO62-CNI=SI fell 0.26 percent to $117.2 a tonne on Thursday, ending two sessions of gains, according to the Steel Index.
Steel mills showed little buying interest, and the best bid for an Australian fines cargo on trading platform Globalore was $114.5 a tonne, $3 lower than the offer after having traded at $120 on Wednesday, the Steel Index said.
Metal Bulletin Iron Ore Index .IO62-CNO=MB, one of the three major global index publishers, expects i ron ore prices to average close to $120 a tonne for August.
"Given weak fundamentals and a poor global economic outlook we do not expect prices to increase above $130 a tonne...any downside will be supported at $115 a tonne as more supply is knocked out of the market," it said in a research note.(Source: Reuters)
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