Steel price fell to 12-year low in China

Chinese prices for steel products, used primarily for home and building construction, fell to a 12-year low as demand from the world's largest steel consumer is peaking in the construction season. This trend will inevitably affect world steel prices.

The average rebar price fell to 2,458 yuan ($ 396) a tonne, to its lowest level since January 2003, according to Beijing Antaike Information Development Co. Rebar prices are down 11 percent this year as a prolonged downturn in China's real estate sector hurts demand for steel products. Prices fell after hitting a two-month rise before peak seasonal demand from April to June. New home prices fell in April from a year earlier in 69 of 70 cities monitored by the government, according to the National Bureau of Statistics.

“For secondary industries such as construction, we are at the peak of the season or have passed,” said Ding Ginger, research analyst at Bulletin Metal in Shanghai. Steel demand in China fell 6 percent in the first quarter from last year, the China Metals Association said in April.

Crude steel production in April fell 0.7 percent to 68.91 million tons from a year earlier, while fixed investment was the weakest in 15 years. Together, infrastructure projects and construction provide about two-thirds of the demand for steel products in China.

Contracts on the Shanghai Futures Exchange fell to their lowest level since trading began in 2009. Futures retreated 1 percent to close at 2,349 yuan a tonne. Qingdao iron ore at 62 percent dropped to $ 61.31 a tonne, according to Metal Bulletin Ltd. "Without a major injection of stimulus into the Chinese economy, we believe prices will be under pressure beyond the peak demand season," analysts at HSBC said.