Iron ore futures slipped on slowing steel demand and prolonged sintering curbs that dampened market sentiments.
The futures of Dalian Commodity Exchange (DCE) for January delivery then went down by 2.04% day-on-day or down RMB 13.50 to RMB 649/mt, during the day trading session on Wednesday.
The rebar futures, however, went up by 1.07% day-on-day or up RMB 47 to RMB 4,441/mt, during the day trading session.
Steel output reduces by air pollution measures
Some trade participants viewed the recent paper market decline to be more in line with the slowing steel demand market with extending air pollution measures that reduced operations.
In the meantime, the traditional holidays season also slowed the demand for steel exports, while the cold weather also affected steel production in northern China’s industrial sector.
There was also ongoing effort to reduce smog among 64 Chinese cities during winter season in preparation for the upcoming Winter Olympics, while steelmaking hubs like Tangshan and Handan had to comply with the level 2 emergency response to improve air quality.
Declining steel production despite rising investment
The recent economic data also reflected lower steel demand and output, as the country’s crude steel production dropped to a yearly low, during the Jan-Nov period.
According to National Bureau of Statistics (NBS), China’s crude steel output reached 946.4 million mt over Jan-Nov 2021 period, down 2.6% year-on-year, with significant yearly drop of 22% in November production.
The lower output was linked to various production restriction measures that aimed not to exceed previous year crude steel production level at 1.065 billion mt, as part of the China’s goal to reduce carbon emissions.
Despite the declining steel output, China’s fixed asset investment (FAI) rose by 5.2% yearly to RMB 49.4 trillion or $7.8 trillion during the Jan-Nov 2021 period, with the service sector, attracting most of the investment, based on NBS data.