Iron ore futures continued to rally on restocking demand and tight supply concerns over Brazilian and Australian ores due to unfavorable weather conditions.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) then, rose by 1.45% on-day or RMB 15 to RMB 1,053/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange followed the rally and extended gains by 1.85% or RMB 79 day on-day to RMB 4,360/mt.
Market concerns over tighter iron ore imports
Chinese mills stepped up their pre-Lunar New Year restocking pace amid tightening supply from Brazil due to the monsoon season. High grade fines like Carajas fines were much sought after by mills for its high Fe content that improve productivity.
Furthermore, the recent fire incident at Brazilian iron ore terminal of Ponta da Madeira confirmed some of the mills’ concern to stock up more high-grade fines before supply disruption from rainy weather and unforeseen circumstances.
Apparently, the Brazilian terminal with 230 million mt/year loading capacity, then continued to operate with minimum impact from the fire incident, though Vale claimed that one of its ship loaders was affected.
Likewise, some trade participants preferred to snap up Australian cargoes before adverse weather conditions like heavy rain and cyclones affecting production and shipments.
High build-up of steel stocks due to Covid-19 transportation restriction
China’s traders steel stocks continued to rise for the third consecutive week, due to cold winter and transportation restriction measures that affected distribution of finished steel products.
According to Mysteel, the traders’ steel stockpiles reached 14.7 million mt over the Jan 8-14 period, up 5.3% on-week. The steel stocks consisted of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate.
Due to rising coronavirus in Shijiazhuang, Hebei, the Chinese authority imposed stricter truck transportation restriction measures and favoured railway transportation.
This caused more mills to stock up finished steel products in warehouses and waited for availability of transportation slots to dispatch the finished goods to customers.
Thus, the Chinese mills’ stockpile of finished steel products also rose for the third consecutive week by 6.3% on-week to 5.8 million mt as of Jan 13, according to Mysteel.