Iron ore futures rebounded on Thursday, due to supply tightness and expected reduced steel output for the second half of the year.
The futures of Dalian Commodity Exchange (DCE) for September delivery then rose by 1.08% day-on-day or up RMB 12.50 to RMB 1,166/mt at the close of day trading session on Thursday.
The rebar futures also inched up by 0.76% on-day or up RMB 39 to RMB 5,146/mt, during the day trading session.
Lower steel output for H2 2021 to cut emission
The market uptick was attributed to Chinese authority’s push for reduced steel production as they tried to ensure steel production of 2021 to stay below of 2020 level to reduce emission.
Thus, Sinosteel Futures expected Chinese crude steel output to face an average daily reduction of 19,000 mt per day throughout the July to December 2021 period, or a fall of 3.5 million mt year-on-year.
Some trade participants believed that the output cut will support stronger steel prices and margins, which had weakened recently due to low steel demand.
Low China’s PMIs to dampen market sentiments
Some market participants remained cautious over steel demand as China’s latest economic data showed slower growth in June.
As China’s Caixin manufacturing PMI dropped to 51.3 in June, down 0.7 reading from 52 points recorded in May, affected by resurgence of Covid 19 in southern China and Asia.
The private PMI followed the declining official PMI at 50.9 recorded in June, down from 51 in May, as state-owned enterprises suffered from industrial inputs shortages that slowed manufacturing production.