Iron ore futures recovered from previous day slump and inched up slightly at the close for the day trading session on Wednesday.
The futures of Dalian Commodity Exchange (DCE) for September delivery then went up by 0.22% day-on-day or RMB 2.50 to RMB 1,137.50/mt during the day trading session on Wednesday.
The rebar futures, however inched down by 0.30% day-on-day or RMB 17 to RMB 5,658/mt, during the day trading session.
Market uncertainty over output cuts
The market was still hit with uncertainty over further output cuts as part of China’s policy to reduce crude steel production till the end of the year.
So far, the steel mills from 12 provinces, as well as Shanghai and Chongqing municipality, have been notified by Chinese authority to maintain their crude steel production below 2020 levels.
These measures were joined by mills based in Shandong province, which pledged to cut its overall crude steel production in 2021 by 17% or 15 million mt in comparison to previous year output.
Southern China-based mills were heard to reduce steel output by a loss of around 17,000 mt/day, starting in mid to late July, as part of power saving measures during summer season.
Improving profits margins among Chinese mills
Mysteel estimated the profit margins of Chinese mills’ blast furnace at an average of RMB 718/mt as of Jul 27, recovering from negative margin for same period last month.
During the period, China’s hot-rolled coil (HRC) export prices also rose for third consecutive week to RMB 935/mt as of Jul 27, up RMB 10 week-on-week, based on Mysteel assessment.
However, some trade participants were concerned that the Chinese authority might introduce new taxes on steel exports to curb steel productions for H2 2021.