Iron ore futures had toned down from yesterday record-high session, but still maintained the upward momentum on bullish steel demand.
The futures of Dalian Commodity Exchange (DCE) for September delivery inched up by 1.67% on-day or RMB 21.50 to RMB 1,306.50/mt on Tuesday, much lower as compared to high 10% increase seen on previous day.
The steel rebar contract on the Shanghai Futures Exchange, also recorded decent gains by 4.59% or up RMB 267 day-on-day to RMB 6,086/mt.
Cooling measures come into play
Some trade participants linked the slight market uptick to the cooling measures imposed by DCE after the market surge on Monday.
These measures included raising of trading limits and increasing margin requirements for iron contracts, which is the minimum amount of capital that must be deposited to trade futures.
Moreover, the bourse also revoked previous fee waiver by imposing fees for closing positions on the most active contracts for its steel rebar and hot-rolled steel coil futures, for delivery in October, at 0.01% of the total transaction value with effect on May 11 onwards.
High steel margins to fuel further growth
China’s electric arc furnace (EAF) steel producers’ profit margins reached RMB 1,000/mt, according to Mysteel’s estimate.
The high margins for EAF reflected high steel prices with record high prices seen in domestic HRC prices that reached over RMB 6,000/mt recently, while Tangshan billet prices went over RMB 5,600/mt level and rebar prices to over RMB 5,600/mt level.
Due to the high steel prices, some trade sources estimated steel margins of blast furnace to reach the range of RMB 1,300-1,500/mt or even higher in early May on bullish estimate.