Iron ore futures opened high but dipped at the close with further market selloff, as restocking activities slowed.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) dropped by 1.54% day-on-day or RMB 16 to RMB 1,025/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange however, gained slightly by 0.09% or RMB 4 day on-day to RMB 4,303/mt.
Thin steel margins and end of restocking activities
Some trade participants were heard to have completed their pre-Lunar New Year restocking activities, while the thin steel margins caused some northern-based mills to bring forward their maintenance period.
Meanwhile, some market participants are expecting healthy demand for the post-Lunar New Year at second half of February and sought for mainstream mid-grade fines, though some of them were interested in high grade fines as well.
Lump demand remained high as well, however most buyers were only interested in Pilbara Blend lump and Newman Blend lump for their high Fe content. Going forward, lump demand is slated to slide later in March due to the easing of the sintering restrictions.
China’s daily crude steel output rises in mid-January
China’s daily crude steel output gained slightly by 1.02% on-period to an average of 2.22 million tonnes over the Jan 11-20 period, according to China Iron & Steel Association (CISA).
The slight increase in daily production was attributed to steady steel production from the domestic medium and large-sized steel mills throughout the ten-day period.
The rising output was seen especially among the electric arc furnace mills, which enjoyed higher margins and had more incentive to raise production. Meanwhile, mills using blast furnaces were heard to incur higher production costs amid thin steel margins.