The selloff in Chinese steel and bulk commodity futures is getting even uglier

Matt King/Getty ImagesHe’s holding a long position.

The selloff in Chinese steel and bulk commodity futures is getting even uglier.

Here’s the scoreboard as at the mid-session break on Wednesday.

SHFE Rebar ¥3,514 , -1.90%
DCE Iron Ore ¥452.00 , -1.63%
DCE Coking Coal ¥1,168.50 , -5.19%
DCE Coke ¥1,953.50 , -4.64%

The October rebar contract in Shanghai is currently down 1.9% at 3,514 yuan, a one-month low. It has been as high as 3,705 yuan just four sessions ago.

The weakness in steel prices is also weighing on iron ore, coke and coking coal prices, its key raw material inputs.

Coking coal and coke futures, in particular, are under the cosh following direct intervention from China’s government to lower thermal coal prices.

On Tuesday, China’s state planner (NDRC) ordered utilities this week to stop stockpiling thermal coal and told miners to slash prices, according to Reuters citing sources, marking the government’s first direct intervention since mid-2016.

“The NDRC also asked miners to bring spot coal prices back under 570 yuan per tonne by June 10, from current levels of as much as 650 yuan per tonne,” sources told Reuters.

That likely explains the weakness across the broader coal complex on Wednesday.

Iron ore futures are also under pressure, extending the selloff seen over the past week.

According to a separate report from Reuters, China’s NDRC said on Monday that it would send inspection teams to carry out overcapacity check at steel mills in 21 regions, including the key steelmaking provinces of Hebei, Jiangsu and Shandong.

The checks are expected to run between May 22 to June 15.

“Surprise check may affect production, but in general, steel output will remain at a high level. With demand getting tepid…steel prices would be on a declining trend,” analysts at Orient Futures said in a note seen by Reuters.

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