Iron ore futures opened low, only to finish higher after an afternoon rally that pushed trading to high note.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) then rose to 3.35% on-day or RMB 33 to RMB 1,019.50/mt on Monday.
The steel rebar contract on the Shanghai Futures Exchange also hiked up by 1.79% or RMB 77 day on-day to RMB 4,383/mt.
China’s manufacturing sector shows strong recovery, though at slower pace
The upticks in futures may reflect market optimism on the growing Chinese manufacturing sector, though the private PMI dipped lower in December, but still recorded an eighth consecutive month of growth in 2020.
During December, China’s Caixin/Markit manufacturing PMI reached 53 readings, lowered than 54.9 readings recorded in November, suggesting a slowdown in manufacturing activities toward year-end.
Nevertheless, the private index was still strong in comparison to past standards and was in-line with the country’s official PMI which recorded 51.9 in December, lower than 52.1 reading recorded in November.
According to trade sources, China’s manufacturing industry continued to recover from the pandemic, as the economy rebounded from the lows in Q1, and reached 4.9% GDP growth in Q3 2020, due to government stimulus support in the infrastructure sector.
Slower growth for rebar prices in early January
Despite the strong economic indicators, China’s construction steel prices were expected to ease in early January, due to slow down in restocking demand and construction activities in northern China.
According to Mysteel, prices of rebar and wire rod were slated to ease further in Jan 4-8 period, as buyers were more cautious in procurement, amid market uncertainty over the new year.
However, prices of HRC were likely to rise on reduced production due to the winter output restriction policy in China, while the demand of HRC remained firm in both domestic and oversea market.