Mon, 18 Nov 04:05:00 GMT
* Steel demand unlikely to get short-term boost from policy reform
* Other commodities also weaker, but equities jump
By Manolo Serapio Jr
SINGAPORE, Nov 18 (Reuters) - Shanghai rebar futures dropped to their lowest level in almost three weeks on Monday, with China's sweeping reform plans unlikely to buoy short-term steel demand in the world's top consumer.
Chinese iron ore futures and other commodities from copper to oil similarly retreated, defying gains in equities, where investors cheered Beijing's boldest reform plan in decades aimed at a more consumption-driven economy. [ID:nL4N0J0350]
The most briskly traded rebar contract for May delivery on the Shanghai Futures Exchange fell as low as 3,583 yuan
($590) a tonne, its weakest since Oct. 29, and was down 0.6 percent at 3,591 yuan at the midday break.
"There's not really much in the reform plan that would stimulate demand for steel and commodities in general in the short term," said Ting Zhou, analyst at Jinrui Futures in Shenzhen.
Zhou said China's evenutal move away from investment-focused economic growth could also cut its demand for steel.
"They don't want to see rapid growth in construction and infrastructure, so demand cannot be positively impacted. On the supply side, the government is trying to control supply of steel," he said.
China said it would "strictly rationalise the supply and use of land for construction and improve the efficiency of land use in cities", according to details of its 60-point reform plan unveiled on Friday. [ID:nL4N0J02Y7]
Industrial overcapacity is one of the big problems that China's leaders are bent on addressing, and the steel sector is high on the list of industries Beijing is aiming to trim.
Steel overcapacity in China, which produces nearly half the world's steel, has cut the profit margins of domestic steelmakers, limiting the impact of any recovery in demand.
After dropping slightly last month, daily crude steel output in China rose 2.2 percent to 2.144 million tonnes in the first 10 days of November compared with late October, industry data showed. [STEE/CN]
"They have a real problem with overproduction. We have seen it all before, but any successful implementation will definitely cut demand for iron ore and concentrate buying power into fewer Chinese hands," said Jamie Pearce, head of iron ore broking at SSY Futures.
Iron ore for delivery in May at the Dalian Commodity Exchange was down 0.4 percent at 931 yuan a tonne.
Iron ore for immediate delivery in China's Tianjin port <.IO62-CNI=SI> rose 0.2 percent to $136.80 a tonne on Friday.
Shanghai rebar futures and iron ore indexes at 0334 GMT
Contract Last Change Pct Change
SHFE REBAR MAY4 3591 -23.00 -0.64
DALIAN IRON ORE MAY4 931 -4.00 -0.43
THE STEEL INDEX 62 PCT INDEX 136.8 +0.20 +0.15
METAL BULLETIN INDEX 137.11 -0.75 -0.54
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.0922 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Alan Raybould)
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