Iron ore futures rebounded from previous trading day loss, due to higher steel prices and better margins.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then surged up by 3.88% day-on-day or up RMB 40 to RMB 1,070/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange, however managed to dip slightly by 0.47% or RMB 22 day-on-day to RMB 4,701/mt.
Better steel margins in March
Chinese steel margins had improved in March, due to higher steel demand for traditional construction season as the weather turned warmer in China.
So far, the Chinese hot rolled coil and rebar sales margins had averaged $19/mt and minus $8/mt, respectively, in Jan-Feb 2021, despite an oversupplied steel market.
However, the margins for these two steel products had improved significantly at $38/mt and $22/mt, as of Mar 12. The improving margins were attributed to stringent output curbs imposed in Tangshan at early March to improve air quality.
Despite the uptick, the steel margins were still much lower than pre-Covid level of hot rolled coil and rebar sales margins recorded at $46/mt and $77/mt in Jan-Feb 2019 period respectively.
Lower daily steel crude output from output curb
The steel prices were further supported by output restriction in Tangshan, as Chinese authority imposed 50% sintering cuts that affected steel operation.
Thus, the daily crude steel production reached to an average of 2.27 million mt per day during Mar 1-10, down 2.1% from previous 10-days period in late February, according to China Iron & Steel Association (CISA).
Mysteel attributed the low daily crude output to the maintenance of 62 blast furnaces over the March 4-10 period, or almost half of the 126 blast furnaces surveyed in Tangshan.