Iron ore futures reversed into losses on Thursday, as market participants expected more output cuts ahead that limited raw material demand.
The futures of Dalian Commodity Exchange (DCE) for September delivery then dropped by 1.59% day-on-day or RMB 18 to RMB 1,114.50/mt during the day trading session on Thursday.
The rebar futures, however hiked up by 1.95% day-on-day or RMB 110 to RMB 5,753/mt, during the day trading session.
Extension of production cuts to more Chinese provinces
Trade participants were concerned that the steel output cuts may extend to more Chinese provinces, which led to higher steel prices but lesser demand for raw materials.
The recent bad weather conditions brought by Typhoon In-Fa also failed to support high iron ore prices, as local steel mills produced normally during the period, though there were some discharging delays among ports in Jiangsu and Zhejiang provinces.
Traders were also heard to be selling cargoes via various channels, as there were little buying interests among Chinese end-users over further output cuts.
Lower Chinese mills’ iron ore stocks from slow consumption
Mysteel recorded lower imported iron ore sintering fines among Chinese mills at 15.9 million mt as of Jul 28, down 1.2% week-on-week.
The low stocks were due to the Chinese authority’s call for reduced steel production for the rest of the years and resulted in less restocking activities among steel mills.
Most mills prioritized on consuming their current inventories at hand, and thus more cautious on purchases or replenishing iron ore stocks.
Moreover, the Chinese authority announced the removal of tax rebates on 23 steel products, starting on August 1, which lowered the incentives for more steel exports.