Iron ore futures dropped on market uncertainty over military conflict in Ukraine that dampened market confidence.
The futures of Dalian Commodity Exchange (DCE) for May delivery then dropped by 3.13% day-on-day or down RMB 22 to RMB 680.50/mt, during the day trading session on Friday.
The rebar futures also dropped by 1.85% or down RMB 87 to RMB 4,617/mt, during the day trading session.
Market uncertainty over military conflict and regulators policy
Besides growing market uncertainty over the Russia-Ukraine conflict, trade participants were also waiting for further moves and direction from the market regulators like the National Development and Reform Commission (NDRC) in cutting excessive stocks.
According to Mysteel, China’s iron ore port inventory stood at 158.57 million mt as of Feb 25, down 1.47 million mt weekly, indicating a drop from the record high level of 160 million mt since early this year.
However, some trade participants felt that the port inventory were still high and expected some state intervention to step in and reduce the inventory by selloffs from traders’ stocks.
Japan steelmakers to seek raw material alternatives away from Russia and Ukraine
With the boiling event of military conflict between Russia and Ukraine unfolding, Japanese steelmaker, Nippon Steel expected minimal impact to its raw material sourcing.
As the Japanese steelmaker will switch supply sources to Australia and Brazil for iron ore and pellets, which it previously used to procure around 14% of its iron ore pellets from Russia and Ukraine sources.
This switch might be followed by other regional steelmakers as well, as steelmakers tried to diversify their raw materials sources from the conflict zone, as they expected retaliatory sanctions to be placed on Russian exports.