Iron ore futures continued to correct after another choppy session, as market participants felt the effect of trading limits imposed by the exchange.
Thus, the most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) went down by 5.78% or RMB 62.50 to RMB 1,027/mt on Wednesday.
The steel rebar contract on the Shanghai Futures Exchange also dropped by 4.08% or RMB 182 day-on-day to RMB 4,283/mt.
Clampdown on speculative trading and new coronavirus strain concerns
The declining paper market was due to the DCE imposing stricter measures to restrict speculative trading, by raising higher commission fee and trading limits.
As industry body like the China Iron and Steel Association (CISA) claimed that the recent iron ore rally as speculative and did not reflect the physical market well.
There were also some market concerns about the new Covid-19 strain, which may dent steel demand globally, due to more lockdowns.
Nevertheless, the steel outlook remained largely positive, driven by Chinese stimulus-driven economic recovery and robust steel demand for the new year.
High rebar production for Jan-Nov 2020
Chinese rebar production increased by 5% on-year to 242.7 million mt during the Jan-Nov 2020 period, due to better margins and steel demand.
According to the country’s National Bureau of Statistics (NBS), the rebar output growth had accelerated lately, due to higher productivity from steel mills using electric arc furnaces, which resulted a rise of 2.8% yearly rebar output growth to 23.3 million mt in November alone.
However, the rebar production is slated to slow by year-end due to lower construction activities during winter season and routine maintenance period scheduled for some northern China-based mills during this period.
Despite the expectation for lower output, Chinese rebar prices rose to a two-year high at RMB 4,579/mt as of Dec 22, up RMB 13/mt on-day.