Iron ore futures dropped on the day session, following market bearish sentiment on falling steel prices and thin margins.
The futures of Dalian Commodity Exchange (DCE) for January delivery then fell by 2.53% day-on-day or down RMB 14 to RMB 539/mt, during the day trading session on Monday.
The rebar futures also slipped by 4.54% day-on-day or down RMB 197 to RMB 4,138/mt, during the day trading session.
Falling steel prices and thin margins
The futures decline was attributed to falling steel prices, as the Tangshan billet prices languished to a 9-months low at RMB 4,130 over the weekend, due to low steel demand.
The low steel prices had turned steel margins venturing into unprofitable territory, as Platts estimated negative profit margins at $6.65/mt for domestic HRC and negative $2.09/mt for rebar as of Nov. 12. In comparison to positive margins of $175.21/mt and $207.12/mt recorded from early October respectively.
Hence, trade sources expected more price corrections for rebar and wire rod over November 15-19, as Chinese traders might sell off existing stocks to lower their exposure to pricing risks.
China’s pig iron production drops to a two-year low
Chinese pig iron output had declined faster during the off-peak season, reaching a low output volume of 63.03 million mt, down 19.4% on-year and recorded the lowest output level since March 2018.
The production levels also showed a fifth consecutive monthly decline in October, that contributed to the Jan-Oct pig iron output to drop further by 3.2% on-year to 734.07 million mt, according to the country’s National Bureau of Statistics (NBS).
Some market participants had linked the declining pig iron output to cash-strapped property market that limited construction activities as well as state authority’s goal of limiting steel output within 1 billion mt by the end of this year.