Bloomberg News

Rebar Drops From Five-Month High as Gains Seen Reducing Demand

January 03, 2013

Steel reinforcement-bar futures declined from the highest level in more than five months on concern that the advance may curb a recovery in demand for the construction material in China, the biggest user.

Rebar for delivery in May fell 0.1 percent to 3,986 yuan ($640) a metric ton at the close of the morning session on the Shanghai Futures Exchange. The most-active contract earlier reached 4,023 yuan, the highest price since July 10, set for a fifth weekly gain in the best run since March. The market reopened today after a three-day closure for New Year.

Rebar surged 14 percent in December, the most since July 2009, as China’s economy headed for a rebounded in the final three months of the year after a seven-quarter slowdown as the government increased infrastructure spending and accelerated investment-project approvals.

“We are telling our clients that buying now is like jumping into chest-high water,” Ren Xinlei, an analyst at Luzheng Futures Co., said by phone from Jinan. “Futures are clearly overbought and we may be in a period of correction.”

The 14-day relative strength index rose to 79 on Dec. 31, the strongest level since February 2011. A reading above 70 indicates to some analysts who study such charts that a decline in prices may be imminent.

While the demand outlook is still positive, it will take some time for the physical market to display the increase in consumption suggested by the futures, Ren said.

The average spot price for rebar was at 3,642 yuan on Dec. 31, according to data from Beijing Antaike Information Development Co. Spot iron ore at Tianjin port rose 3.4 percent to $149.80 a dry ton on Jan. 3, the highest level since Oct. 18, 2011, data compiled by The Steel Index Ltd. showed.

To contact Bloomberg News staff for this story: William Bi in Beijing at wbi@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net


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