Iron ore futures went up the roofer at the start of morning trading session to extend the post-holidays rally.
The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE), for September delivery then rallied up to the daily limit by 10% day-on-day or up RMB 120.50 to RMB 1,326.50/mt on Monday.
The steel rebar contract on the Shanghai Futures Exchange, also rose by 5.99% or up RMB 340 day-on-day to RMB 6,012/mt.
Too much demand to handle
The 10% increases in the opening trading session signified the robust market confidence on steel demand amid political tension between Australia and China that might affect the iron ore trade.
Chinese strong steel demand and construction season also played a part in the rally from stimulus measures, with Tangshan billet prices, the bellwether of steel demand then jumped further by RMB 150 on-day to RMB 5,650/mt level, after an increase of nearly RMB 300 over the weekend.
Meanwhile, the lower weekly iron ore stock inventory also spurred higher market interest on whether the supply can keep up with heated post-holidays restocking demand in China.
A broader global recovery on steel
Some market experts explained the steel demand phenomenon not only to contain in China, but rather to the global market except India which is facing record high covid infection rates.
Ex-china steelmakers were heard to enjoy market boom as steel demand recovered from pandemic lows as countries introduce infrastructure stimulus measures to kickstart economy.
China being the only major economic power to avoid negative growth last year and had stimulated its economy previously with such measures earlier, resulting some market experts to believe the effect to wear off by the second half of 2021.
Apparently, the steel demand remained strong in China, despite the Beijing policymakers tried to cut down production to comply with reduced carbon emission regulations.
However, market participants were concerned if Chinese shipmakers and household-goods manufacturers were able to bear high steel prices and yet remained profitable.