Iron ore futures extended the bullish run throughout the week, despite softening of steel prices and Chinese authority’s call to stabilize commodity prices.
The futures of Dalian Commodity Exchange (DCE) for September delivery then rose by 1.88% on-day or up RMB 22 to RMB 1,194/mt on Thursday.
The steel rebar contract on the Shanghai Futures Exchange also followed the upward trend and rose by 1.72% or up RMB 87 day-on-day to RMB 5,148/mt.
Softening steel prices and pledges for more commodity prices control
Despite the paper rally, there was some weakness among steel prices, as the domestic rebar prices went down for the second consecutive day to RMB 5,230/mt by mid-week, down RMB 15/mt on-day.
Likewise, the Tangshan billet prices slid under the RMB 5,000/mt level to the RMB 4,970/mt level during the day session, before rebounding back to the RMB 5,000/mt later at the close.
Some trade participants had linked the declining steel prices to the upcoming rainy season that might reduce steel demand in southern China.
In the meantime, some market participants expected more commodities price controls in the near term.
As China’s commerce ministry announced on Thursday that the committee will continue to stabilize commodity prices through import diversification and strengthening of pricing management.
Chinese mills’ daily iron ore usage jumps to 3-months high
Iron ore consumption remained high among Chinese mills despite production curb, as the daily consumption of imported iron ore sintering fines rose by 5.9% fortnightly to 561,800 mt/day during the May 20-June 2 period.
According to Mysteel, the latest daily iron ore consumption rate reached a three-month high, due to robust steel demand and mills’ dependance on imported iron ore for blending.
Thus, steel and iron ore prices jumped to record-high by mid-May, only to be calmed later by Chinese authority’s pledge for more price controls on the overheated commodity market.
Meanwhile, Mysteel expected higher iron ore shipments from Australia during June, which may ease the supply tightness situation that triggered the price rally in May.