Iron ore futures continued to rally since opening session and closed higher at the afternoon trading session amid robust steel demand.
The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE), for September delivery then rose by 3.58% day-on-day or up RMB 38 to RMB 1,100/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange, also hiked up by 1.18% or up RMB 60 day-on-day to RMB 5,165/mt.
Lower quarterly iron ore output from mining majors
The lower-than-expected iron ore production from major miners like Vale and Rio Tinto sparked some market concerns over tightening supplies, though market participants expected better iron ore shipments during Q2 in view of better weather conditions.
During Q1, Vale produced 68 million mt of iron ore, below market estimate of 72 million mt, and down 19.5% on-quarter, though higher by 14.2% on-year.
Similarly, Rio Tinto reported lower iron ore output at 76.4 million mt for Q1 2021, down 2% on-quarter, due to wet weather, labour shortage and cyclone threats that disrupted mining operations.
Higher grade materials remain popular among Chinese mills
Chinese end-users preferred higher grade materials for feedstocks amid high steel margins, which widened the price spread between BRBF and PBF.
According to trade sources, the northern and eastern China-based mills were seeking high grade JMBF due to their cost-effectiveness relative to PBF at current prices, while buying interests for low grade fines like SSF and Yandi fines had waned amid high steel margins.
Meanwhile, the seaborne lump premiums had weakened due to improving supply that put pressures against further price upticks.