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UPDATE 1-China's steel, iron ore fall on weak demand concerns

Published 20/02/2019, 07:20 pm
© Reuters.  UPDATE 1-China's steel, iron ore fall on weak demand concerns
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* Spot trade yet to resume fully after holidays

* Market eyes demand strength post holiday period - analysts

* Shanxi curbs coke output for environmental reasons (Updates closing prices, add BHP's sector outlook)

BEIJING, Feb 20 (Reuters) - China's construction steel futures fell on Wednesday, as investors remained cautious about the strength of post-holiday demand from downstream users.

Following the Lunar New Year holiday earlier this month, construction sites and manufacturing plants would typically restart business this week.

"Major markets in China have not completely resumed (spot) trading and steel prices in most regions are hovering at a low level," analysts from Galaxy Futures said in a note.

Benchmark Shanghai rebar prices SRBcv1 dipped 0.9 percent to 3,641 yuan ($541.45), when market closed at 0700 GMT after it plunged to a five-week-low level of 3,578 yuan.

Hot-rolled coil SHHCcv1 , a manufacturing-grade steel product, ended little changed at 3,657 yuan.

"Steel output is highly likely to increase after the holiday ... And the market focus will switch to demand strength from downstream users," Jinrui Futures analysts said in a note.

Global mining giant BHP Group BHPB.L BHP.AX anticipates China's infrastructure to rebound in 2019, while its property market will be resilient and the automobile market will improve after a very weak 2018, according to the company's economic and commodity outlook on its website https://www.bhp.com/media-and-insights/prospects/2019/02/bhps-economic-and-commodity-outlook#steel.

Faltering steel prices also dragged on iron ore futures, as the market questioned if mills will delay restocking until steel sales pick up.

China's producer price index (PPI) in January rose a meagre 0.1 percent from a year earlier, official data showed last week, raising concerns the world's second-biggest economy may see the return of deflation as domestic demand cools. iron ore futures DCIOcv1 ended a three-day winning streak on Wednesday, falling 2 percent to 619.5 yuan a tonne.

Coke futures DCJcv1 , however, rose 2.1 percent to 2,113 yuan a tonne, supported by concerns over tight supply in coal mining hub Shanxi province.

A major coke plant, Shanxi Coking Co Ltd 600740.SS , said on Tuesday that it expects to trim coke output by around 220,000 tonnes due to an environmental restriction issued by the local government, effective from Feb. 16 to Mar. 31.

A bout of smog has been forecast for China's northern region in late February.

China's top steelmaking province Hebei issued an orange pollution alert last week, effective from Feb. 17, that could last until around Feb.22. Orange alerts require industrial companies to cut output by at least 30 percent. = 6.7245 Chinese yuan renminbi)

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