Iron ore futures surged since opening session and closed higher at the afternoon session, amid market optimism for better steel demand.
Thus, the most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange went up by 2.11% or RMB 18.50 day-on-day to RMB 897/mt on Thursday.
The steel rebar contract on the Shanghai Futures Exchange also rose slightly by 0.08% or RMB 3 day-on-day to $3,884/mt.
Good steel demand for year-end
The market optimism held up as China’s robust steel demand is expected to last till end of 2020, before demand slowed down in next year, according to Commonwealth Bank of Australia (CBA).
The high steel demand was primarily driven by infrastructure stimulus spending and the fast recovery of Chinese economy from the coronavirus pandemic.
According to CBA, China purchased over 83% of Australian iron ore shipment so far, which pushed the Platts benchmark iron ore prices to multi-years high over $130/dry mt CFR China back in September.
Slower rebar demand ahead
Despite the optimism, some market participants were concerned over the slowing rebar demand in northern China, as temperature became colder and resulted in lesser construction activities.
Thus, the price of HRB400 20mm dia rebar dropped by RMB 33/mt day-on-day to RMB 4,121/mt on November 25, making the biggest drop since July 17, according to Mysteel.
Meanwhile, there was also negative arbitrage between seaborne and quayside market for mid-grade fines that might affect further upside in iron ore prices.