Iron ore futures ended its bullish run at the close of the week, bowing to the pressure of low steel margins and demand concern over the upcoming rainy season.
The futures of Dalian Commodity Exchange (DCE) for September delivery then went down by 1.85% on-day or down RMB 22 to RMB 1,168/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange however, rose by 1.36% or up RMB 69 day-on-day to RMB 5,159/mt.
Lower steel margins amid rainy season
Chinese domestic HRC margins had fell to $40.81/mt at the start of June, as compared to the average margins of $152.09.mt in May, based on Platts data.
Due to the lower steel margins, some Chinese mills were heard to be seeking for low grade fines like Yandi fines for cost saving and reselling purposes in ports.
Going forward, Platts expected Chinese mills to ramp up steel production in June, which might result in higher steel stocks, though the upcoming rainy season may hamper steel demand.
Supply tightness of iron ore to persist in June
Despite the declining iron paper market, some trade participants expected supply tightness issues to prolong among seaborne iron ore cargoes.
This was due to terminal maintenances scheduled for Port Walcott and Dampier in June, which might affect Australian shipments, while it was heard there was some supply disruption in southern Brazil.
Moreover, it was heard that the PBF stocks had dropped to a low level in Tangshan, while the availability of the grades also remained thin in secondary market.
Thus, China’s port iron ore inventories went down by 874,600 million mt on-week to 125.35 million by June 4, according to Mysteel.