Iron ore futures extended gains upon market optimism of restocking activities for the upcoming Spring festival.
The futures of Dalian Commodity Exchange (DCE) for January delivery then hiked up by 2.13% day-on-day or up RMB 14.50 to RMB 694/mt, during the day trading session on Wednesday.
The rebar futures also went up by 2.09% day-on-day or up RMB 91 to RMB 4,444/mt, during the day trading session.
Rebar output picks up on better margins
China’s rebar production had improved in late December and many trade participants expected similar uptick in early Jan 2022, due to better margins and restocking demand.
According to Mysteel, the rebar output went up by 1.6% week-on-week to 2.69 million mt during the Dec 23-29 period, with high input from Northeast and eastern China-based mills.
As such, the rebar rolling capacity utilization and the operational rates also rose slightly by 0.9% and 1.6% weekly to 59% and 51.2% respectively, as steelmakers prepared for the restocking activities ahead of the Lunar New year holidays in early February.
Moreover, rebar margins were heard to maintain around at RMB 455/wmt, while HRC margins were estimated at RMB 565/wmt, according to trade sources.
Growing port inventory and more shipments from suppliers
Despite the market optimism on steel demand, the port inventory remained record high at 157 million mt of iron ores by mid-December, based on Mysteel’s data.
The high port inventory was only second to previous high of 162.8 million mt of iron ore recorded in Mar 2018, and the high volume may place downward pressure on iron ore prices.
Furthermore, the Australian and Brazilian iron ore shipments had also rose by 1.5% weekly to 28 million mt over the Dec 27-Jan 2 period, adding further pressures on iron ore prices growth with more supplies.