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News: RIO UPDATE 1-China steel futures hit July low after weak home price data

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    • Steel-linked futures quicken falls in afternoon trading hours
    • Shanghai rebar slumps 7 pct, iron ore down nearly 6 pct
    • Investors take profits amid mixed market sentiment
    • Iron ore port inventories climb, near two-year high

    (Adds comment, updates close prices)

    SHANGHAI, July 19 (Reuters) - Chinese steel futures fell as much as 7 percent to a near three-week low on Tuesday, as slowing home price rises stoked worries about demand in the world's top consumer of the alloy.

    Home prices in China slowed in June for a second straight month, adding to fears that a construction-led economic rebound in the economy may be unsustainable.

    Benchmark October prices for rebar, or reinforcing bar - a steel product used for construction, on the Shanghai Futures Exchange SRBcv1 tumbled 7.2 percent to a session low of 2,264 yuan ($338.13) a tonne, its weakest so far this month.

    Rebar closed down 5.8 percent at 2,297 yuan. "The market is divided now. Some expect a big drop in home price rises will weigh on the steel sector, while some hope that supply interruptions and low inventories will underpin prices," said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen.

    "I believe the downside risk remains small as rebar futures fell too quickly and are slightly below spot now. Prices will fluctuate at high levels," he added.

    As of now investors are banking profits, after a 22-percent rally in rebar over the past four weeks, as evident from a drop in open interest to 2.33 million lots on Tuesday, from 2.51 million lots on Monday.

    Overall commodity prices are expected to weaken in the second half of this year as slowing China home price rises hurt the country's demand for commodities, Commonwealth Bank of Australia analyst Vivek Dhar said in a note.

    "We expect floor space sold to continue to slow on the back of moderating new home price growth."

    Tracking lower steel futures for the day, raw material iron ore DCIOcv1 fell as much as 6 percent to a one-week low of 420.5 yuan a tonne on the Dalian Commodity Exchange. The September contract ended down 5.2 percent at 423.5 yuan.

    Coke DCJcv1 dropped more than 3 percent and coking coal inched down 0.3 percent.

    Chinese steel mills have maintained high running rates, driving up prices of the raw material iron ore by almost 50 percent this year. But higher port inventories and ramped-up production at top miners could drag on the raw material.

    Iron ore inventories at big Chinese ports CUS-STKTOT-IORE reached 105.5 million tonnes last Friday, the highest since Sept. 16, 2014, according to

    Rio Tinto (RIO) has said it is on track to meet its full-year iron ore shipment guidance from its Australian mines of roughly 330 million tonnes, underscoring the strength of sales to China, despite concerns of oversupply.

    ($1 = 6.6980 Chinese yuan renminbi)

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