Iron ore futures opened higher from previous day slump, but only managed a slight recovery at the close, due to lower steel consumption in China.
The futures of Dalian Commodity Exchange (DCE) for September delivery then dropped by 1.27% day-on-day or down RMB 11.50 to RMB 895/mt, during the day trading session on Friday.
The rebar futures, however moved flatly and inched down by 0.96% day-on-day or RMB 52 to RMB 5,379/mt, during the trading session.
Low steel consumptions amid output cuts
Market sentiment remained weak, due to the stringent production cuts and market concerns over lower steel demand from slow construction activities and impacts of the fresh Covid outbreaks in China.
According to Mysteel, the major steel products consumption had dropped by 2.5% week-on-week to 9.86 million mt, as of Aug 5.
The low steel consumption also caused rising steel stocks among Chinese steel mills, as Mysteel recorded steel stocks at 6.5 million mt as of Aug 4, up 6.2% on-week, after surveying 184 mills.
Rising Covid concerns on steel demand
Steel demand was also impacted by the fresh Covid outbreaks in China, which disrupted the logistics of commodities.
As strict transportation cross-border checks were imposed on trucks crossing the Chinese provinces of Jiangsu, Henan and Hubei.
Moreover, Chinese steel mills were heard to purchase on need-basis with their blast capacity utilization rate dropped for the third consecutive week to 85.73%, down 1.11% on-week and down 9.03% on-year, during Jul 30- Aug 5 period.