Chinese futures ended the week on high note, due to better buying interests over tightness in port inventory.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, hiked by 3.33% on-day to RMB 668 per tonne at Friday.
Following the rally, the steel rebar contract on the Shanghai Futures Exchange hiked up slightly 0.20% day-on-day to RMB 3,464 per tonne.
Supply tightness from port drawdown
Port inventory has tightened with huge draw down, which support iron ore prices over the near term.
According to Mysteel’s survey of 45 Chinese ports, the port inventory recorded at 110.95 million tonnes on 15 May 2020, down 940,600 mt on-week.
Among the inventory, Brazilian ores accounted 22.59 million tonnes, or 20.3% of the total inventory, down 2.7 million mt on-week.
This raised some concerns among trade participants as the supply tightness of Brazilian supply is expected to last for a while, despite better weather condition and more shipment pledged by Brazilian suppliers.
Based on the data, the ships arrival to Chinese ports had also saw a drop of 4 on-week to a total for 78 vessels for the week ended on 15 May 2020.
Anticipation of stricter sintering cut ahead of the Two Sessions
Some Chinese buyers have stocked up ahead of the two session meetings as normally the Beijing policymakers will restrict the industrial production to improve air quality ahead of big events.
Thus, market sources were anticipating some stricter environmental control and sintering cuts to be imposed ahead of the Two Sessions meeting in China during the late May period.
In the meantime, they were also concerned about the unstable supply of Indian fines from the extended lockdowns in India and prompted them to seek for low grade ores from Australian suppliers instead.