SINGAPORE (Reuters) - Shanghai steel rebar futures edged lower on Monday, reflecting a drab outlook for demand in top steel consumer China that has restrained buying of iron ore ahead of the Lunar New Year break this month.
The most-traded May rebar contract on the Shanghai Futures Exchange dropped half a percent to 4,176 yuan a tonne by the midday break, its second loss in four sessions.
"Chinese steel mills have no confidence in the market in the short term, demand is still low and we expect this to continue until February," said an iron ore trader in Shanghai.
Thin demand for steel is limiting buying interest among the Chinese for raw material iron ore before the week-long holiday that starts on Jan. 23.
In the past years Chinese mills have aggressively stocked up iron ore ahead of the annual holiday, lifting spot iron ore prices strongly during the period.
"There's some restocking activity but it's limited. Most of our clients are still hesitating to purchase too much raw material because the steel market is not that encouraging," said the Shanghai trader.
Offer prices for imported iron ore in China were mostly steady on Monday, said Chinese consultancy Umetal, with Australian Pilbara fines at $139-$141 a tonne and Yandi fines at $126-$128 a tonne, including cost and freight.
Indian 63.5/63-grade fines were quoted at $145-$147 a tonne, said Umetal.
Iron ore with 62 percent iron content was nearly flat at $140 a tonne on Friday, gaining just more than 1 percent over the first week of 2012 after falling nearly 19 percent last year, according to Steel Index .IO62-CNI=SI.
Steel Index said inquiries for iron ore stocked at Chinese ports, which are cheaper compared with fresh cargoes, are increasing, although purchased volumes were still small.
China's apparent crude steel consumption is forecast to rise 4 percent to 700 million tonnes this year, the chairman of the China Iron and Steel Association said last week.
But Zhu Jimin warned that prospects for the steel sector remained gloomy, with the entire sector facing falling profits in 2012.