Iron ore futures booked a slight gain after a volatile market session, amid market sentiment of lower steel demand during rainy season.
The futures of Dalian Commodity Exchange (DCE) for September delivery then inched up by 0.68% on-day or up RMB 8 to RMB 1,178/mt on Thursday.
The steel rebar contract on the Shanghai Futures Exchange also hiked up by 2.68% or up RMB 135 day-on-day to RMB 5,168/mt.
Rainy weather to affect steel demand
Despite the futures price upticks, market participants were concerned over the wet weather in southern China that affected construction activities and steel demand.
However, it appeared the reduction in steel demand moved far slower, as Tangshan billet prices went up by RMB 20 on-day to RMB 4,980/mt by mid-day.
Meanwhile, the lump usage demand is expected to drop due to the rainy season, but the lump demand went against market expectation with rising market enquiries from Japanese steel mills that supported higher premium.
More interests for iron ore pellets
Iron ore pellets had been attracting much market interests lately as a cost-effective alternative to lump, amid extended sintering controls in Tangshan.
However, market participants were concerned by the long port clearance of Indian pellet cargoes for arrival in Chinese ports due to stricter pandemic custom controls.
Some of the shipping delays resulted in high demurrage charges, while there was also supply tightness of Brazilian pellets, though Vale had restarted its Samarco’s mine earlier this year which did little to alleviate the shortages.