Iron ore futures closed lower by the end of the week, as more buyers became cautious after iron ore prices reached a record-high level earlier in the week.
Thus, the most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange dropped by 1.29% or RMB 11 day-on-day to RMB 841.50 per tonne on Friday.
However, the steel rebar contract on the Shanghai Futures Exchange hiked up slightly by 0.29% or RMB 11 day-on-day to RMB 3,783 per tonne.
Lower utilization rate among Chinese mills
The blast furnace utilization rate was lowered by 0.36% on-week to 94.8% for the week ended on August 20, according to mysteel’s survey of 247 Chinese steel mills.
Some of the market participants expected that some of the Chinese steelmakers may reduce their production due to high iron ore prices.
However, other trade participants think that the high raw material prices will not affect the productivity as most of the Chinese mills still enjoy good rebar margins at around RMB 350/mt or $50.60/mt.
Port congestion lowers port inventory
Despite the dip in Chinese mills’ utilization rates, the iron ore prices may draw some support from the declining port inventory.
As China’s port inventory took a dip for the third consecutive week, due to port congestion issues that extended unloading time.
For the week of Aug 14-20, the country’s port inventory stood at 112.4 million tonnes, down slightly by 0.7% or 813,000 tonnes on-week, according to Mysteel’s survey of 45 major Chinese ports.
There was a notable decline in Australian iron ore imports, which went down by 1.6% on-week to 57.9 million tonne over the Aug 14-20 period.
Based on Mysteel’s data, the decline of Australian imports was for the fourth consecutive week and caused a supply tightness for medium grade fines among Chinese ports, which in turn pushed iron ore prices to historical high.