Iron ore futures closed the week on gains, despite market concerns about growing steel stockpiles and easing of supply tightness for iron ore.
The futures of Dalian Commodity Exchange (DCE) for September delivery then went up by 1.24% day-on-day or up RMB 14.50 to RMB 1,185/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange also spotted gains of 1.81% or RMB 90 day-on-day to RMB 5,066/mt.
Growing steel stockpiles and easing of supply tightness
There were some signs of easing of raw materials among the Chinese ports, as Mysteel reported iron ore port inventories at 121.76 million mt for the week ended Jun 25, up by 870,000 mt week-on-week.
Moreover, Chinese traders’ steel stockpiles had grown for the second consecutive week as of June 24, indicating slower steel consumption and demand.
According to Mysteel, a total of 22.3 million mt of finished steel stocks held by Chinese traders, up 1.7% on-week, consisting of rebar, wire rod, hot-rolled coil (HRC), cold-rolled coil and medium plate products.
However, Chinese steel prices remained firm and rose by RMB 20 to RMB 4,840 for the Tangshan billet prices. As there were some voluntarily output cuts by mills in Tangshan ahead of the 100th anniversary of the Chinese Communist Party in Jul 1, which drove up the steel prices.
Higher commodity prices from global recovery
Some trade participants had linked the futures upticks to the market optimism on global economy recovery from the pandemic, as countries adopted infrastructure plans to kickstart their economies.
Market sentiments were also lifted by positive bipartisan outcome of US 1.2 trillion infrastructure plan on Thursday which might push up construction commodity prices further.
Meanwhile, Chinese steel demand remained firm according to Fitch Solutions, due to higher industrial needs, while supplies from global producers were constrained.
However, the consultancy firm added that steel rally might end in the coming months, after an improvement in supply and weaker consumption by downstream players.