Chinese steel and raw materials futures fall

Chinese steel prices declined for the second straight session in a week as demand remained subdued, dropping the key metallurgical raw material iron ore by more than 3 percent.

Steel demand has remained weak since the Lunar New Year holiday in late February and is likely to recover gradually from mid-March. This is limiting the rise in steel prices, due to expectations of a production cap approved by the government this year.

Zhao Chaoyu, an analyst at Merchant Futures in Shenzhen, said: "If demand does not rise quickly at the end of March, we will see prices enter a downtrend."

The most active rebar contract on the Shanghai Futures Exchange fell to a session low of 3948 yuan ($ 623.08) a tonne, the lowest since February 26.

China will cut about 30 million tonnes of steel capacity this year, the National Development and Reform Commission said on Monday, putting the country on track to achieve its long-term goals as the government pledged to protect its blue skies.

Zhao expects Chinese steel mills to be more proficient in maximizing output by using more scrap and lower emission electric arc furnaces.

Iron ore on the Dalian Commodity Exchange fell 3.6 percent to 520 yuan a tonne. “Iron ore has the worst foundation of the entire steel production chain due to the port's vast supply and record reserves. So when steel prices come down, iron ore hits the hardest, ”said a research manager at a trading firm in Hangzhou.

Iron ore stocks at major ports hit a record 155.88 million tonnes by February 23, Steelhome data showed. Coke fell 2.5 percent to 2,177 yuan a tonne, while coking coal was down 0.6 percent to 1,374.50 yuan a tonne.