July 21, 2017 / 8:04 AM / a year ago

UPDATE 1-China steel falls for 2nd day on mounting concerns over supply glut

* Long-buyers sell position over glut concern

* Rebar inventory builds

* Restocking demand wanes, curbing prices of raw materials (Updates prices)

BEIJING, July 21 (Reuters) - China’s steel rebar futures fell for a second day on Friday on mounting concern that rising output from mills seeking to cash in on higher prices has glutted the market.

“Investors started to question if the market is turning to oversupply from short supply. The previous optimistic attitude has gone, which also reflects market concern over high margins at mills,” wrote analysts at Orient Futures in a note.

Stockpiles of rebar in 35 major cities in China rose 123,600 tonnes to 4 million tonnes by Friday compared with the previous week, according to data on the Mysteel Consultancy website. That’s up from 3.9 million tonnes a month ago.

The current margin on rebar was 1,128 yuan ($166.72) a tonne for this week, according to Mysteel. That was steady from last week but up from about 300 yuan a year ago.

The most-active rebar futures contract on the Shanghai Futures Exchange fell as much as 3.2 percent to 3,467 yuan a tonne on Friday. It closed at 3,525 yuan, down 1.6 percent.

Open interest in the most-active rebar futures contract fell to 3.78 million lots, equivalent to 37.8 million tonnes, on Friday, down from 4.83 million lots the week before.

Spot rebar rose 0.1 percent to 3,945.06 yuan a tonne on Thursday, according to Mysteel data.

“The increasing inventory in steel products along with the heatwave across the country curbing demand for steel products will fuel a bear market for steel and the ferrous metal market,” Orient Futures wrote.

The most-traded iron ore contract on the Dalian Commodity Exchange dropped 0.9 percent to 521 yuan a tonne on Friday.

Open interest in the September contract has fallen to 1.4 million lots as of Friday, down from 1.8 million lots on Tuesday and the lowest since March 31.

Analysts said mills have been slowing down their restocking process, which put pressure on demands for raw materials.

China’s June iron ore output rose to 124.7 million tonnes, its highest level since October 2015, the National Bureau of Statistics reported on Wednesday.

Coking coal futures eked out gains after falling nearly 2 percent during morning trade. It climbed 0.7 percent to 1,262 yuan a tonne. The September coke contract rose 0.7 percent to 1,946 yuan a tonne.

$1 = 6.7659 Chinese yuan Reporting by Muyu Xu and Beijing Newsroom; Editing by Christian Schmollinger and Biju Dwarakanath

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