Chinese futures slipped slightly on Monday, despite a strong opening due to supply tightness of port inventories.
The most-actively traded iron ore futures for September 2020 delivery on the Dalian Commodity Exchange (DCE) dipped slightly by 0.82% day-on-day to RMB 602 per tonne on Monday.
Similarly, the steel rebar contract on the Shanghai Futures Exchange slid slightly by 0.54% to RMB 3,316 per tonne.
Port inventory drops to almost one-year low
The morning session rally was traced to tight supply of seaborne iron ore stocked across ports in China.
According to Steelhome consultancy, the port inventories of seaborne iron ore recorded at 117.95 million tonnes as of last Friday, at 24 April 2020, the lowest level since 14 July 2019.
Strong iron ore demand had also explained the strong drawdown of port stocks among the Chinese ports, as some end-users engaged in restocking activities before the week-long holidays in early May.
More steel output cut in North Asia
South Korea’s POSCO had reduced its production forecasts for 2020 down by 7% on-year due to lower demand from the coronavirus pandemic.
As such, the largest steelmaker in South Korea had revised its output guidance for 2020 to 34.1 million tonnes from previous target of 36.7 million tonnes.
Sales prediction was also cut to 32.4 million tonnes from earlier estimates of 35 million tonnes back in Jan 2020.
The cut in production reflected the declining sales of automobile industry for 2020, with most trade participants expected a sharp drop in Q2, due to low consumers’ demand during the coronavirus pandemic.
The South Korean mill was not alone in cutting its production forecast as other Japanese steelmakers had done so, especially Japan’s JFE and Nippon Steel which will cut around 20% of their total capacity by idling blast furnaces in view of lower steel demand.