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                                  Asia Steel-China steel prices tumble on rate rise concerns

Market jittery over a second rate hike soon
Two major domestic mills cut December prices

SHANGHAI, Nov 18 - Spot steel prices in China’s domestic market fell this week amid growing concerns of tightening liquidity from a possible interest rate increase.

Construction steel prices in Shanghai’s market fell to 4,450-4,460 yuan per tonne on Thursday, down 2 pct from a week earlier, industry consultancy Mysteel said.

A few traders were reluctant to sell at much lower prices after Shanghai rebar futures rebounded slightly on Thursday from Wednesday.

"The overall market is extremely tense that China might announce a second rate hike soon, which is quite necessary to tame inflation, and commodities prices have all tumbled on liquidity pressure," said Jiang Zhiwei, an analyst with BOC International Futures.

Stronger signals that China, the world’s second-largest economy, is likely to tighten monetary policy via a second rate hike to fight inflation, has triggered widespread concerns and pushed down Shanghai rebar futures dramatically.

The most active May rebar contract <SRBK1> on the Shanghai Futures Exchange rose 1.3 percent to close at 4,611 yuan per tonne on Thursday, but was still down 6 percent from 15-month highs touched last week.

Rising expectations of further monetary tightening and losses in other commodities sent rebar futures to three-week lows on Wednesday.