Reuters reported that Shanghai steel futures came off a one week low on Friday, tracking gains in other metals, but buyers remained hesitant as a tepid economic recovery in China dented hope of a pick-up in demand in the world's biggest steel consumer.
The most active October rebar futures contract on the Shanghai Futures Exchange dipped as low as CNY 3,587 (USD 590) a tonne, the lowest since May 3, before closing up 0.2% at CNY 3,639. It rose by more than 1% this week, its first weekly rise in four.
China's steel demand typically improves in April and May due to a pickup in manufacturing and construction activities after the end of the winter season, but a patchy economic recovery has cast a shadow on demand this year.
In the latest sign of China's economic challenges, factory prices fell for a 14th consecutive month in April on an annual basis, data on Thursday showed.
The absence of strong order-books from end users and traders has forced some Chinese steelmakers to produce at losses, limiting their appetite for restocking raw material iron ore.
An iron ore trader in Shanghai said that "The upside for iron ore will be capped and I expect it will soon start a downward trend, as the steel supply glut and tepid economic recovery will continue to weigh on steel prices.'
Steel consumption in China is expected to enter a seasonal lull in July and August as higher temperatures will slow down activities in the construction sector, the main user of steel.