Market Commentary
Iron ore futures advanced on optimism that China’s steel output will stay elevated for the rest of the year. China’s steel demand is expected to ease off as the nation enters its rainy season. The latest rebar inventory data seemed to confirm that demand in China is slowing down. Rebar production was down -0.28% on-week to 3.71 million tonnes while total rebar inventory was up for the first time in three months to 10.47 million tonnes, up 0.51% week-on-week. Despite the seasonal slowdown, China is still expected to produce 1.07 billion tonnes of crude steel this year, up 1% from the previous year, according to estimates from China Metallurgical Industry Planning and Research Institute. “Chinese iron ore demand will likely stay strong in 2021 as steel output remains high, supported by downstream sectors such as infrastructure construction, machinery and autos,” Yi Zhu, analyst at Bloomberg Intelligence wrote in a report. Meanwhile, inspectors from the Brazilian government said a Vale tailings dam runs the “serious and imminent risk of rupture due to liquefaction of the dam structure”. Vale had previously said there is no imminent risk of a tailings dam rupture and is said to be maintaining dialogue with local authorities.
Futures in Singapore were firmer in London. Jul was seen trading between 207.5 and as high as 209.0 in the morning. Spreads were much wider, with Cal 22/23 at around 32.45. Jul/Sep traded up from 13.15 to 13.25 while Aug/Oct traded at 12.2.
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