Chinese futures dropped on limited buying interest as procurement slowed down and buyers digested high prices and supply impact in the market.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, continued to descend for the second consecutive day by 1.43% day-on-day to RMB 759.50 per tonne on Wednesday.
The steel rebar contract on the Shanghai Futures Exchange also retreated slightly by 0.44% day-on-day to RMB 3,587 per tonne.
More reliance on Australian supplies
Given the potential supply disruption of Brazilian ore, many Chinese steelmakers had sought more Australian medium grade ores instead.
Many end-users also wanted to cut costs from buying of the more expensive Brazilian ores as steel prices were under pressure in China, due to the rainy season in southern provinces.
Instead, Australian medium grade ores had attracted more buying interest with MAC fines and Jimblebar fines gaining popularity among Chinese steelmakers.
Strong China’s rebar demand for summer
Rebar demand is expected to remain robust for the north China market, during the summer season, according to Argus media.
Rebar consumption will be supported for the construction activities of Xiongan New Area this year, which pushed up rebar margins by around RMB 100-200 per tonne.
Moreover, China’s infrastructure construction activities are likely to pick up pace in the second quarter and in the third quarter as part of the government stimulus plan to jump-start the economy after the pandemic.