China’s commodities lose more froth

MANILA: Chinese steel and iron ore futures fell for a third straight day and other commodities steadied on Thursday, giving up more froth after Chinese exchanges slapped curbs to quell speculation that spurred a buying frenzy last month.

Mixed signals on China´s economic health have also weighed on sentiment, breaking earlier perceptions that the world´s second-largest economy had stabilized.

Trading volumes have tapered off from record highs hit in April after China´s securities regulator told commodity exchanges in Shanghai, Dalian and Zhengzhou to rein in speculation following rapid price gains in everything from steel to cotton.

Volume in the most-traded rebar contract on the Shanghai Futures Exchange dropped to nearly 7 million lots on Thursday from as high as 22 million lots on April 21, when the price also touched a 19-month high.

The contract was down 2.9 percent at 2,339 yuan ($360) a tonne by 0603 GMT on Thursday.

Last month, trade in most-active rebar, used in construction, hit a record 1.4 billion tonnes, surpassing China´s entire annual steel production capacity.

"Prices have gone up so much and there was no support from fundamentals, so we´re seeing consolidation," said Helen Lau, an analyst at Argonaut Securities in Hong Kong.

A slew of surveys giving mixed signals on the Chinese economy is also hitting investor sentiment this week.

China´s official survey showed manufacturing activity expanding for a second month in a row, while a private survey showed it contracted for a 14th straight month.

Surveys on the services sector pointed to slower expansion.

"There is concern whether the recovery is solid or not," said Lau.

Iron ore futures were hit hard, with the most-traded contract on Dalian Commodity Exchange down 4 percent at 418 yuan a tonne.

Iron ore traded on the Dalian exchange topped 5 billion tonnes last month, enough to make more than 3 billion tonnes of steel.

Such was the surge in China´s commodity futures in April that daily trading turnover in 18 futures contracts averaged $376 billion over the last two weeks, Morgan Stanley said in a report.