Chinese futures continued to rally for second consecutive day on higher production and margins.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, hiked by 1.09% to RMB 647.50 per tonne at Thursday.
On the contrary, the steel rebar contract on the Shanghai Futures Exchange had slid slightly with drop of 0.52% to RMB 3,445 per tonne.
China to stop importing Australian iron ore?
In another round of political rhetoric, China threatened to stop importing Australian iron ore in retaliation for Australian support for the COVID-19 inquiry.
Previously, the threat included the boycott of Australian beef and barley, while leaving the key iron ore import aside. However, the bilateral relations had soon deteriorated over the squabble of whom to blame for the pandemic.
Australian iron ore exports to China is estimated to worth $63 billion alone, and some trade sources suggest that China might replace the Australian ores by using Brazilian ores instead.
However, this scenario is unlikely as Brazilian suppliers had struggled with shipment earlier this year due to rainy season, and thus lost its rank of world’s top supplier position to Rio Tinto.
China’s manufacturing sector to pick up in second half of 2020
China’s manufacturing sector is expected to pick up in the second half of 2020 as Total Social financing or TSF had improved in April and may continue the uptrend movement onwards.
According to People’s Bank of China, China’s TSF went up by 12% year on the year in April, the highest growth rate since May 2018.
The rising TSF is expected to drive steel consumers’ investment where the infrastructure construction had grown strongly in China.
Similarly, flat steel, use mainly for manufacturing is also grown in view of upcoming Chinese stimulus programs as well as the gradual recovery of oversea markets.