Iron ore futures hiked up higher on better steel prices and market optimism on better steel margins and demand.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange booked a gain of 2.64% or RMB 22 day-on-day to RMB 855/mt on Monday.
The steel rebar contract on the Shanghai Futures Exchange also rose by 2.16% to RMB 3,919/mt, following the steel prices rally.
Good rebar demand amid low stocks
The market optimism was attributed to high rebar demand, as price reached almost a one-year since December 2019 to RMB 4,124/mt last week for HRB 400 20mm dia rebar.
The price uptick traced to a ten-month low of rebar stocks held by 137 Chinese mills over the November 5-11 period at 2.5 million tonnes, while the traders’ inventory also went low and dropped by 9.9% on-week to 8 million tonnes for the November 6-12 period.
These drawdowns of rebar stocks followed the Chinese construction firms’ final push for their construction projects before the winter season. As it will be harder to procced with construction activities under cold weather condition.
Softening steel prices for the week
Despite the good steel outlook, Chinese rebar prices are expected to soften over the November 16-20 period, in view of the upcoming cold weather especially in the North China region.
There were also some signs of slowing steel demand in October, as the country’s crude steel production went down slightly by 0.4% on-month to 92.2 million mt, according to Mysteel’s data.
However, there might be higher demand for iron ores, due to typical restocking demand that occurred during the second-half of November, based on market statistics.