Iron ore futures continued to fall throughout the trading session due to high port inventory and slowing demand.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange then went down to an almost one-month low at RMB 760.50 per mt on Monday, down 3.31% on daily basis.
The steel rebar contract on the Shanghai Futures Exchange went with the downward momentum and dropped 1.04% day-on-day to RMB 3,613 per mt.
High port inventory and lower steel output
High port inventory took most of the blame for the declining futures market as SteelHome consultancy recorded 127.8 million mt of iron ore among Chinese ports as of Oct 23, eight-month high volumes since February.
The high port inventory also rose for the fifth consecutive weeks, which led some market participants to doubt if the Chinese steel demand were able to absorb the surplus.
Moreover, the Chinese construction activities were in their final lap as they are expected to slow down as winter season approached in China and resulted a pullback in steel output.
China’s steel demand to rise by 5%, lower than previous estimate at 8%
China’s finished steel demand is expected to reach a growth of 5% for 2020, according to China Iron & Steel Association (CISA).
The CISA’s estimate was lowered than previous World Steel Association’s projection of an 8% yearly growth for this year.
According to CISA, the lower yearly growth at 5% was due to a 30% decline of China’s steel demand during the first quarter of 2020, due to the negative economic impact from the coronavirus pandemic.