Iron ore futures dipped by the close of the day trading session, as trade participants expected more top-down measures to cool the market.
The futures of Dalian Commodity Exchange (DCE) for September delivery then dropped for the second consecutive day by 3.25% on-day or up RMB 40 to RMB 1,192.50/mt on Wednesday.
The steel rebar contract on the Shanghai Futures Exchange, also fell by 5.55% or down RMB 312 day-on-day to RMB 5,309/mt.
Declining steel prices amid cooling measures
The dip reflected the decline in steel prices such the domestic HRC prices which dropped from record-high level last week at RMB 6,700/mt level toward RMB 6,400/mt level this week.
Meanwhile, Tangshan billet prices also plunged down in one of the biggest single trading day drop by RMB 170 on-day to RMB 5,300/mt.
Trade participants attributed the lower steel prices to the Tangshan-based mills’ suspension of sintering operations by 10 hours per day till May 20, as enforced by the authority.
Moreover, some market participants expected more related cooling measures to be introduce by Beijing policymakers to curb the overheated market.
Steel margins to fall from the peak
The cooling measures had also caused steel margins like domestic HRC and rebar products to drop from the peak recorded at $278 for the week ended in May 15, according to Platts’ estimate.
The current Chinese steel margin for HRC and rebar were assessed at around $170/mt after mid-May, down 38% after the Chinese authority stepped in to calm the market speculation.
Despite the declining margins, the high steelmaking profits still managed to provide incentives for Chinese traders to snap up seaborne mainstream cargoes, especially for the mainstream cargoes.