Iron ore futures opened high at the morning session, before experiencing more easing at the afternoon session but managed to book gains at the close, ahead of the Golden Week holidays.
The futures of Dalian Commodity Exchange (DCE) for January delivery then jumped by 5.41% day-on-day or up RMB 37 to RMB 721.50/mt, during the day trading session on Thursday.
The rebar future also hiked up by 1.15% day-on-day or up RMB 65 to RMB 5,706/mt, during the day trading session.
Mixed outlooks after Chinese holidays
Despite the rising paper market, the market outlook was mixed, as restocking sentiment had waned among trade participants, and there were concerns over power constrains and ongoing steel output curbs that affected raw material demand after the holidays.
Chinese steel mills will usually maintain their operations throughout the holidays, but the nationwide power rationing might disrupt the flows and resulted in more night shifts to avoid peak day time power consumption.
Meanwhile, a mining incident occurred in FMG’s Solomon hub, Western Australia that resulted a death of one worker and temporary suspension of the mine complex with production capacity of 75 million mt per year.
Falling steel stocks among Chinese warehouses
China’s steel stocks continued to decline to 17.9 million mt as of Sep 30, down 7% on-week, as steel consumption increased by 9.9% on-week, according to Mysteel’s data.
The steel products consisted of rebar, wire rod, HRC, CRC and plate, while the output of these steel products also shown a decrease of 6.3% on-week, due to power rationing policy and ongoing steel output cuts.
Despite the good steel consumption, the China’s Purchasing Managers’ Index (PMI) for manufacturing fell to 49.6 readings in September, for the first time in 18 months under the 50 points into contractionary region, due to bearish market sentiments.