Metalnewsnet 30 Apr ：

Industry consultancy Mysteel said Shanghai construction steel prices stood at 4,140-4,160 yuan ($606.7) per tonne on Thursday, down 1.4 percent compared to last week.

On the Shanghai Futures Exchange, three-month rebar contracts SRBc3 fell 3 percent to end Thursday at 4,404 yuan per tonne.

Traders in Beijing said spot transactions for most major steel products had declined, leading to a fall in prices over the week, but plummeting end-user inventories meant the lull was unlikely to last long.

"This is the first price decline in more than a month, and iron ore prices have also levelled out, but I don't personally think it is right to say that this is a turning point," said a representative with a trading company in Beijing.

Confirming the destocking, Luo Bingsheng, vice-chairman of the China Iron and Steel Association, told a briefing on Wednesday that product inventories in major cities were expected to stand at 9.77 million tonnes by the end of April, down 9 percent since last month.

The association has cited bulging stocks as one of the major reasons why steel price rises were unlikely to match cost hikes this year, and Luo said they remained too high.

Luo claimed the full impact of soaring iron ore prices had not yet been felt by Chinese steel mills, which were still mostly using last year's imports over the first quarter.

Traders suggested this week's destocking could have been triggered by a reluctance throughout the industry to tolerate April's rapid surge in spot ore costs.

"Many are just walking away from the market and hoping the pressure will ease naturally," a Shanghai-based trader said.

"We expect activity on the steel market to resume because actual demand is strong and it is clear that iron ore prices have peaked for the time being," he added.

CISA pointed out that the steel industry invested 61.8 billion yuan in the first quarter of the year, up 22.7 percent compared to last year, further adding to China's oversupply problems.

It also noted that the 69.5 percent increase in steel exports in the first quarter was not sufficient to take up the slack. Chinese mills were facing "intensifying" foreign competition as well as the threat of protectionism, it added.

Mysteel analyst Ricardo Wang said the timing of any change in the exchange rate of the yuan would have a big impact on prices over this year by eroding the competitiveness of Chinese exports, but the cost of iron ore would remain the deciding factor.

"If (ore) prices rise by more than 80 percent, it will certainly put a heavy burden on downstream industrial products and on the recovery of the world economy, and could lead to a double-dip recession. If that happens, there will be restraints on steel price increases and they will return to more appropriate levels," he said in a research note.

(from Reuters)