Iron ore futures continued its correction phrase as buyers found prices too high amid mixed market sentiments.
The most-traded iron ore for September delivery on China’s Dalian Commodity Exchange dropped by 0.42% or RMB 3.50 day-on-day to RMB 826 a tonne on Friday.
However, the steel rebar contract on the Shanghai Futures Exchange gained slightly by 0.19% or RMB 7 to RMB 3,726 per tonne.
China’s crude steel output grows 4.5% in June
Chinese appetite for steel continued to grow with higher reports of crude steel and pig iron production in June to meet its infrastructure demand.
In June, the country produced a total of 91.58 million mt of crude steel in June, up 4.5% year-on-year, according to National Bureau of Statistics.
Likewise, the pig iron production also rose by 4.1% to 76.64 million mt in June. Over the Jan-Jun period, the country’s pig iron and crude steel output increased by 2.2% and 1.4% on the year to 432.68 million mt and 499.01 million mt respectively.
The high production levels were spurred by government investment in the infrastructure sector such as the approved plan for 13 airport construction projects worth RMB 104 billion or $14.87 billion.
Market expects more corrections ahead
Some buyers believed that the iron ore prices were too high from recent rally and expect further price correction ahead.
However, they expected that there will not be a sharp correction to an extent of under $100/mt levels but for a more gradual decline from current range.
Besides, there seemed to be much iron ore supply available as Rio Tinto just recorded a high iron ore shipment from Australia during June quarter at 86.7 million mt, as compared to 85.4 million mt a year ago.
Similarly, Kumba iron ore, a unit of Anglo-American maintained its annual total sales guidance between 38 and 40 million mt, despite 11% drop in its production for the six months of 2020.
However, the scheduled port maintenance in Brazilian and Australian ports and terminal during July, might slow down the shipments and logistics.