Iron ore futures failed to rally, despite low steel stocks and lesser iron ore supply from Rio Tinto as the miners reduced its annual guidance for 2021.
The futures of Dalian Commodity Exchange (DCE) for January delivery then fell slightly by 0.96% day-on-day or down RMB 7 to RMB 723.50/mt, during the day trading session on Friday.
The rebar futures however, inched up slightly by 0.99% day-on-day or up RMB 54 to RMB 5,515/mt, during the day trading session.
Lower Chinese steel stocks due to better consumptions
Both Chinese mills and retail steel stocks dropped to lower levels by mid-October, as demand picked up after the long holidays in early October.
Thus, Chinese mills’ steel recorded at 5.06 million mt over Oct 8-13 period, down 3% on-week, while Chinese retail steel stocks fell to an 8-month low of 20 million mt as of Oct 14, down 5.2% on-week.
Despite better steel consumptions after the weeklong holidays, trade participants were still bearish on steel production as they expected tougher steel output curb for the winter season across mills operating in Beijing-Tianjin-Hebei region.
Less iron ore shipments from Rio Tinto, due to operational issues
Rio Tinto had adjusted its annual iron ore shipment downward to 320 – 325 million mt for 2021, from previous range of 325-340 million mt.
The major miner cited tighter labor market and tighter global supply chains as main reasons for the cut, though some trade participants believed the production shortfall were linked to weather-related interruption that occurred earlier in the year.
Besides Rio Tinto, some market participants also doubted whether other major miners like Vale will be able to fulfill their annual guidance, given the lower iron ore price environment and ongoing steel output curbs in China.