Iron ore futures ended the week on gains, despite dipping the morning session then only to rebound in the afternoon trading session.
The futures of Dalian Commodity Exchange (DCE) then hiked slightly by 0.98% day-on-day or up RMB 8 to RMB 823/mt, during the day trading session on Friday.
The rebar futures also climbed by 0.30% or up RMB 14 day-on-day to RMB 4,670/mt, during the day trading session.
Slow steel demand that causes high mills’ inventory
The Chinese mills’ inventories continued to climb amid slow steel demand, as Mysteel recorded a total of 7 million mt, up 0.3% over May 5-11 period.
The inventory level had risen for the third consecutive week to reach a one-year high level, as shipments increased after the long holiday earlier in the month.
However, the Chinese port inventory dipped for the week ended on May 12, with a total volume at 140 million mt, down 3.3 million mt on-week, according to Mysteel. The drawdown was due to the buyers’ preference for buying portside stocks, rather than importing iron ore due to thin steel margins.
Meanwhile, the blast furnace capacity utilization rate continued to rise among Chinese mills, as more mills completed their maintenance period. According to Mysteel, the utilization rate went up by 0.53% on-week to 88.28% over the May 6-12, rising for the third consecutive week.
Japanese steel output to rise in Q2
Japan’s crude steel output is expected to rise 3.5% quarter-on-quarter to 20.85 million mt over Apr- Jun 2022, according to the country’s Ministry of Economy, Trade and Industry (METI).
However, the estimated Q2 steel output is lowered by 2.1% based on yearly basis, probably due to less demand from Japanese auto industry, due to the shortage of chips.
Moreover, the low steel margins also limited further ramping up of production, due to higher energy costs which caused a major Japanese steelmaker to call for quicker restart of nuclear reactors to remain competitive.