Reuters reported that Chinese steel futures dropped more than 2 percent to their lowest in almost nine months on Monday and iron ore swaps slid, pressured by soft demand in the world's biggest steel consumer whose economic recovery may be at risk of stalling.
Data last week showing China's factory activity shrank for the first time in seven months in May has cast doubts on the already tepid recovery in the world's No. 2 economy, dimming the outlook for steel and iron ore demand from the key consumer.
The most traded rebar contract for October delivery on the Shanghai Futures Exchange closed 2.1% lower at the day's low of CNY 3,496 (USD 570) a tonne, its weakest since September 7th 2012.
A Shanghai-based iron ore trader said that steel demand slowed further last week in some parts of China due to heavy rains ahead of the seasonally weak consumption period that usually starts in June.
He said that "Mills are just not getting enough orders so their inventories keep building up. At some point they would need to cut output sharply otherwise they would be facing some cashflow problems."
Data showed that China's daily crude steel output eased slightly to 2.185 million tonnes in mid May from a record pace of 2.193 million tonnes in the first 10 days of the month.