Iron ore futures opened high, only to close lower later at the afternoon trading session, due to softer China’s economic indicators and lower construction activities.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), thus dipped by 0.76% day-on-day or RMB 7.50 to RMB 977.50/mt on Monday.
The steel rebar contract on the Shanghai Futures Exchange also went down by 1.15% or RMB 49 day on-day to RMB 4,221/mt.
China’s PMIs slide from lower export orders
China’s private Caixin/Markit PMI dropped to 51.5 for January 2021, down from previous 53 readings reported in December 2020, due to slowdown in manufacturing output and declining overseas export orders.
More countries imposed stricter lockdowns to curb the resurgence of coronavirus cases, which caused slower economic recovery, while the slow rollout of vaccines dampened market outlook.
China’s official PMI also dipped to 51.3 reading in January 2021, down 0.6 basis points from previous month, implying that many Chinese state-owned enterprises were also affected by lackluster manufacturing demand.
However, both indexes remained above the 50-reading mark, which indicated that the overall Chinese manufacturing sector was still expanding, just at a slower pace compared to previous month.
Daily construction steel sales fall to 11-months low
China’s daily construction steel sales volumes also dropped to a 11-month low, due to slow construction activities and workers returning home for holidays.
According to Mysteel, the daily trading volume of construction steel reached 33,890 mt per day as of Jan 29, down 11,740 mt per day on-day, as many construction sites ceased operations ahead of the Spring festival.
Hence, Mysteel expected the prices of construction steel products to ease further over the Feb 1-5 period, such as products like rebar and wire rod.