Ferrous Sector Money Flow: DCE iron ore saw significant money flow in the market and rebounded after a few weeks of consolidation. However during the Asian morning Tuesday iron ore stuck in an RMB 5-7 range again. DCE iron ore index created a gold cross on Monday near-oversold area. The high of the September contract also broke previous level at 772.0. However technically there has no solid evidence to confirm a bullish market in the medium term yet.
Macro: Some securities analysts in China believe a bull stock market has returned, since the Shanghai Composite hit a three year high above 3300. The ferrous and non-ferrous were linked to the big rebound of U.S. and China stock market.
China housing is supporting steel usage because of the big market base and resilient demand. Infrastructure projects have made a limited increase on steel usage since some of investment were used to balance the debt structure rather than start new projects.
Advanced infrastructure has also seen some double counting with previous traditional infrastructure from last year.
Steel Sector: The apparent consumption of construction steels have slid to the five year average from a five year high in last 2-3 months. The consumption will tend to go down in following weeks as production reaches equilibrium and inventories enter a restocking phase.
The early month Tangshan environment production curb raised some speculation sentiment on steel, however rebar only rebounded for a day before consolidating in a narrow range.
Iron Ore: Iron ore port inventories started to pick up steadily from mid-June. Daily pig iron production reached 2.48m tonnes, the high of the year and also because blast utilisation rate reached a full capacity. Assuming daily lifting firm at 3.15m tonnes, daily port arrivals are 3.44m tonnes, which is higher than demand. Iron ore port stocks are expected to keep growing however mid-grade iron ore is more tightly balanced in port stocks.