Mon, 21 Oct 04:27:00 GMT
* Iron ore futures fall after rise on debut day
* Mills restocking curbed by tight cash flow
* Steel demand is typically sluggish in winter season
By Ruby Lian and Fayen Wong
SHANGHAI, Oct 21 (Reuters) - Chinese iron ore futures fell more than 1 percent on Monday as restocking by steel mills in the world's top consumer remained tepid on a sluggish demand outlook for the alloy in the fourth quarter.
Steel demand typically slows down in November and December as construction activities in China's northern regions are hampered by the cold temperatures, which limits steel mills' appetite for building inventories of the raw material.
"Mills' sales orders are weaker and they are short of cash flow which has restrained iron ore buying, wiping out upside for prices, though purchases in small volumes have kept prices relatively steady for now," said an iron ore trader in Shanghai.
The most active 62 percent grade iron ore futures for May settlement on the Dalian Commodity Exchange fell 1.5 percent to a session low of 960 yuan ($160) a tonne. It traded at 968 yuan by the midday break.
The new contract closed 1.8 percent higher at 977 yuan on its debut on Friday. The contract price includes a 17 percent value added tax and other costs.
By comparison, the benchmark spot price for same grade iron ore <.IO62-CNI=SI> stood unchanged at $134.4 a tonne on Friday, according to provider Steel Index.
In the absence of a pick-up in orders from end users, Shagang, China's top privately-owned steelmaker, kept prices unchanged for late October bookings, traders said. That means rebar will fetch 3,580 yuan a tonne and wire rod 3,640 yuan a tonne.
The most-traded January rebar contract on the Shanghai Futures Exchange stood almost unchanged at 3,563 yuan a tonne by the midday break after falling for three consecutive sessions.
"The cash flow will remain a big issue for mills until there is a big improvement in steel demand and some billet producers are cutting prices to withdraw cash," said an iron ore trader in Beijing.
Shanghai rebar futures and iron ore indexes at 0334 GMT
Contract Last Change Pct Change
SHFE REBAR JAN4 3563 +2.00 +0.06
THE STEEL INDEX 62 PCT INDEX 134.4 +0.00 +0.00
METAL BULLETIN INDEX 134.78 +0.17 +0.13
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.0968 Chinese yuan)
(Editing by Muralikumar Anantharaman)