Iron ore futures rebounded on the day session, despite market concerns over reduced raw material demand from the ongoing power rationing in China.
The futures of Dalian Commodity Exchange (DCE) for January delivery then jumped by 2.13% day-on-day or up RMB 14.50 to RMB 694/mt, during the day trading session on Wednesday.
The rebar future also hiked up by 1.07% day-on-day or up RMB 60 to RMB 5,657/mt, during the day trading session.
Market concerns over power crunch
Chinese trade participants had intensified their restocking needs ahead of the holidays in early October, though some market participants held mixed market views after the week-long holidays period.
Much of their concerns centered around the nationwide power cut policy, which Mysteel estimated over 70% of the steel rolling mills in Jiangsu province were asked by Chinese authority to scale down their operations since Sep 8.
So far, the authority did not provide an end date for the power rationing of the country’s second largest steel producing province, though some trade participants expected the output restriction may be lifted sometime after the Golden week holidays.
Low domestic steel output to boost rebar prices
The domestic output of steel products had dropped to a new low to 9.17 million mt as of Sep 22, since March 2020, due to power rationing and the ongoing steel output curbs.
However, the low production volume had spiked the rebar prices as the national price of HRB400E 20mm dia rebar under Mysteel’s assessment rose to 4-months high at RMB 5,814/mt as of Sep 28, up RMB 41/mt on-day.
Some trade participants expected further upticks for rebar prices due to limited output as the power rationing measures had been extended to nearly 21 provinces, while Goldman Sachs estimated around 44% of industrial activities to be affected by the power crunch.