Iron ore futures inched up higher on Wednesday, as market participants became more cautious amid mixed market outlooks.
The most-traded iron ore for September delivery on China’s Dalian Commodity Exchange went up by 0.54% or RMB 4.50/mt day-on-day to RMB 837 a tonne.
Following the upturn, the steel rebar contract on the Shanghai Futures Exchange rose by RMB 11 or 0.294% at RMB 3,746 per tonne.
Steel demand remains firm amid adverse weathers
With adverse weathers in China, such as heavy rains in southern China that resulted floods, while in the northern China, the hot summer heat threatened to affect construction activities.
Despite the grim outlook, some trade sources highlighted that the steel demand remained firm without much slowdown. Besides, the worst of the wet season is expected to be over soon, while there are no signs of softening steel output.
Outside of China, there seen to be recovery of iron ore demand among the EU, Japan and South Korea as mills were resuming operations after easing of lockdown measures.
Tighter supply ahead?
Part of iron ore price rally was due to supply tightness in port inventory and lower shipments from Australia and Brazil.
For instance, Brazil’s Vale shipped 4.69 million mt for the week ended on July 11, down 27.22% week-on-week, and lower than average shipment for the previous four weeks.
Then, BHP’s iron ore exports also dropped by 24.03% week-on-week to 5.24 million mt for first week of July from Port Hedland, after the miner ended its fiscal year by June 30.
Going forward, market participants expect lesser Australian shipment given their port terminals maintenance in July, while more Brazilian shipments ahead unless hindered by rising coronavirus cases in Brazil.