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Iron ore, steel futures hit eight-week lows on China woes

Release date:2014-08-15 Clicks:19 Font display:【Large】  【Medium】  【Small】

SINGAPORE, Aug 14 (Reuters) - Chinese steel and iron ore futures slid to eight-week lows on Thursday as fresh concerns over China's economy cast doubts on the outlook for demand for the two commodities.

A gauge of money flowing into China's economy fell to the lowest since October 2008, adding to fears that a sustained recovery may be at risk in the second half of the year despite government efforts to shore up growth. [ID:nL4N0QH1O4]

The data, released on Wednesday along with fixed-asset investment and retail sales numbers that undershot expectations, countered initial optimism that Beijing's stimulus efforts were working as evidenced by recent firm manufacturing and export data.

China's steel sector is among those to which Beijing has tightened credit in its bid to address industries plagued by overcapacity.

"Tight credit is something that mills will have to start to learn to live with. But it's the pressure on physical steel prices that's pulling the iron ore market down again," said a trader in Shanghai.

Wednesday's data, which showed a steep fall in China's new yuan loans to 385.2 billion yuan ($62.59 billion) in July from 1.08 trillion yuan in June, "confirmed market suspicion that credit conditions continue to remain difficult, particularly for steel mills," Australia and New Zealand Bank said in a note.

Iron ore for January delivery on the Dalian Commodity Exchange fell to a session trough of 651 yuan a tonne, its lowest since June 20, before settling at 653 yuan, down 1.7 percent.

The most-traded January rebar contract on the Shanghai Futures Exchange dropped 1.1 percent to close at 3,021 yuan a tonne, just off the day's low of 3,020 yuan, also its weakest since June 20.

Rains in central and southern China have hampered construction activity, the Shanghai trader said, limiting demand for steel.

Rebar, a steel product used in construction, is now trading at levels close to the record low of 3,010 yuan reached in June.

That could translate to further weakness in spot iron ore prices which had already fallen to near eight-week lows on Wednesday, traders said.

Iron ore for immediate delivery to China <.IO62-CNI=SI> dropped 0.9 percent to $93.20 a tonne, its lowest since June 20, according to data compiled by Steel Index.

It was the fourth consecutive day of decline for the benchmark spot price and brought its year-to-date loss to just over 30 percent.