Iron ore futures got off to a poor start of the week with softening rates due to lower steel prices and reduced margins.
The futures of Dalian Commodity Exchange (DCE) for September delivery then fell by 5.21% on-day or up RMB 58.50 to RMB 1,064/mt on Monday.
The steel rebar contract on the Shanghai Futures Exchange, followed the dip and went down by 3.57% or down RMB 184 day-on-day to RMB 4,974/mt.
Close monitoring from the Chinese authority
The red-hot rally seen earlier in the month had faded as market participants readily accepted the state’s pressure on bulk commodities prices movements.
According to Mysteel, Beijing policymakers’ stern warning of overheated market had led steel prices to decline in both the spot and futures market over last week of the May 17-21 period.
Thus, market participants expected more cautiousness ahead and further price correction in the upcoming rainy season.
The price movement of the Tangshan billet had reflected the market downtrend well, after recording a loss of RMB 640 over the May 18 -22 period.
Recovery in rebar prices for the week
Despite market intervention from the state, some trade participants expected some price recovery of rebar and wire rod prices over the May 24-28 period from the recent slump.
This was due to low rebar inventory among Chinese commercial warehouses surveyed by Mysteel, which dropped continuously over the three months period to 11.2 million as of May 20.
Perhaps, the supply tightness of iron ore shipments was one of the main causes for the earlier price rally, as market participants had doubts over Brazilian supplies, while steel mills from Japan and South Korea had been importing iron ore aggressively for their own economic stimulus policies.
For instance, Brazil shipped 25.75 million mt of iron ore in April, down 6.5% on-month and well below the usual 34-35 million mt shipment seen last year. Meanwhile, Japan’s iron ore import reached an almost two-year high at 8.99 million mt in April.