Iron ore futures fell further after poor China economic indicators, while market concerns on the ever-expanding steel output cuts that limited demand for the upcoming construction peak season.
The futures of Dalian Commodity Exchange (DCE) for September delivery then dropped by 7.78% day-on-day or down RMB 64.50 to RMB 765/mt, during the day trading session on Wednesday.
The rebar futures followed the bearish market sentiment and went down by 1.72% day-on-day or RMB 92 to RMB 5,242/mt, during the day trading session.
Cloudy market outlook despite peak season
China’s Caixin manufacturing PMI recorded 49.2 in August, indicating a contracted sector for the first time since April 2020.
The private manufacturing PMI reading performed much poorer, when compared to the five-month low China’s official PMI reading at 50.1 for the month of August.
As Chinese manufacturing sector was embattled by new wave of Covid Delta infections and bad weather situations, such as heavy rains and floods at central China regions.
Moreover, there was also market talks of more steel production cuts being implemented among more Chinese provinces to improve air quality, despite entering the traditional peak construction season during the Sep-Oct period.
Easing of supply tightness from steady shipments
Market participants also expected improving supplies of iron ore shipments from overseas suppliers as they were less affected by bad weather and were driven to fulfill their annual guidance.
According to Mysteel, the total iron ore shipments from Australia and Brazil dropped slightly by 42,000 mt week-on-week to 26.15 million mt during the Aug 23-29 period, after recorded a weekly gain previously.
During the week, Australia’s iron ore exports had improved by 5% on-week to 18.47 million mt, while Brazilian shipments had decreased by 10.8% on-week to 7.68 million mt.
Trade sources believed that the higher Australian shipments might relieve the supply tightness of PBF stockpiles among the ports of Tangshan and Shandong over the near term.