Iron ore futures closed higher at the afternoon session, despite a sluggish start in the morning session, amid good steel consumption for the week.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then rose by 1.72% day-on-day or RMB 19.50 to RMB 1,151/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange moved flattish and went up slightly by 0.09% or RMB 4 day-on-day to RMB 4,677/mt.
High steel consumption during post-holidays
Chinese mills’ steel inventories fell 1.1% week-on-week to 9.7 million mt over the Feb 18-24 period, due to high steel consumption after the holidays.
According to Mysteel, the steel stocks comprised of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate. Among the steel products, the hot-rolled coil inventory experienced a sharp fall to 1.3 million mt, down 9.1% as compared to other steel products.
The steep decline was attributed to high domestic demand for manufacturing consumers goods like cars and home appliances.
Meanwhile, Chinese traders’ steel stocks reached 32.8 million mt over the Feb 18-25 period, up 16.4% week-on-week, as traders built up stocks for the upcoming construction season in March.
High blast furnace utilization rates after holidays
The high steel consumption went along with the high blast furnace capacity utilization at 92.28% as of Feb 25, up 0.1% on-week, according to Mysteel’s survey of 247 steel mills across China.
The utilization rates were also at its highest after mid-December last year, as mills ramped up production after their routine maintenance during the Lunar New Year holidays.
Similarly, most of the electric-arc-furnace (EAF) steelmakers across China had also resumed their operations by this week.
Meanwhile, the EAF capacity is slated to grow by another 4.1 million mt per year to a total of 186 million mt per year by the end of 2021, due to the country’s environmental commitment to cut carbon emissions.