Chinese steel futures prices, a key indicator of local market sentiment, dropped slightly on Wednesday, ending several days of slow increase. The steel demand situation remains weak, Kallanish notes, with analysts noting that May demand appears lower than April and with little sign of recovery.

The October 2015 rebar contract on the Shanghai Futures Exchange closed down CNY 9/tonne at CNY 2,355/t ($385/t), while the same contract for hot rolled coil dropped just CNY 2/t at CNY 2,470/t. The slight decline could be interpreted as a sign of stability considering the news of further iron ore price forecast reductions from Citigroup (see separate article).

China’s steel demand remains weak, however. Macquarie’s latest iron ore survey shows a decline in orders at mills in May from April, while steel market inventories were reportedly level despite this normally being a seasonal period of declining inventories. Only demand from infrastructure projects increased, while construction demand has predictably fallen and automotive demand is flat, says Macquarie.