Iron ore futures slid over output restriction concerns in Tangshan, which dampened market appetite for raw materials.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then dipped by 3.47% day-on-day or down RMB 37.50 to RMB 1,042/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange, also dropped slightly by 0.73% or RMB 35 day-on-day to RMB 4,746/mt.
Extension of output curb in Tangshan
Chinese authority had extended the output cut in Tangshan till end of the year to comply with environmental emission regulations.
Under the regulation, the Tangshan-based steel mills will be categorized into A,B,C and D level, with level D mills subjected to 50% cut in blast capacity, then B and C level for 30% cut, while mills in A category will not be subjected to any cuts, as they adhere to the strict emissions regulations.
Thus, Mysteel estimated that the full-year molten iron capacity to be restricted around 22.23 million mt, as compared to previous guidance of 27.80 million mt, and thus affected iron ore demand at around 35.27 million mt.
Lower steel stocks from better consumption
Chinese mills’ steel stocks decreased on better steel consumption, according to Mysteel’s survey of 184 steel mills.
Stockpiles of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate, reached 9.2 million mt for the week ended on Mar 17, down 4.1% on-week amid robust steel demand.
However, there was market concerns over steel export demand, as they were market talks of cuts in export tax rebates, though no official announcement had been released yet.