Iron ore futures closed lower at the day session, despite some rally in mid-session but failed to recover lost ground.
The futures of Dalian Commodity Exchange (DCE) for January delivery then fell by 4.62% day-on-day or down RMB 26 to RMB 536.50/mt, during the day trading session on Wednesday.
The rebar futures followed the dip and dropped by 1.19% day-on-day or down RMB 51 to RMB 4,246/mt, during the day trading session.
Low daily crude steel output recorded in October
The decline reflected low steel consumption and output, which market expected to last throughout year-end, after record-low daily steel production levels were recorded in October.
According to China Iron & Steel Association (CISA), China’s daily crude steel output reached a 44-month low at 2.338 million mt/day in October, down 21.4% on-year due to weak steel demand.
The low daily output was also linked to poor performance of property sectors with stricter financing, which resulted the value of financing by China’s property developers in October to drop 60% on the month and 75% on the year.
Declining profitability for Chinese mills amid low steel demand
The falling steel margins also contributed to lower crude steel production, due to increased production costs and plunging domestic steel prices.
As Mysteel assessed rebar margins of Chinese mills to register RMB 246/mt in October, down RMB 555/mt on-month, as profits were offset by high materials cost amid falling steel prices.
This downtrend of profitability may extend toward year-end, given the off-peak demand season and sluggish industrial demand in China.