Iron ore futures closed the week on slight drop after a week of corrections, amid ongoing production cuts among Chinese mills.
The futures of Dalian Commodity Exchange (DCE) for September delivery then dipped by 0.94% day-on-day or down RMB 8 to RMB 841.50/mt, during the day trading session on Friday.
The rebar futures also fell by 0.70% day-on-day or RMB 38 to RMB 5,421/mt, during the day trading session.
Tougher environmental regulations for steel mills
The bearish market sentiment was linked to recent statement from China Iron and Steel Association (CISA) that industry regulatory bodies will limit steel production levels of non-environmental compliance mills.
Market participants expected that this will lead to more suspension of smaller mills that failed to invest in systems that reduce pollutions and offer cost-effective power management.
Due to the ongoing output cuts, Mysteel recorded lower capacity utilization rates of blast furnaces at 85.89% for the week ended on Aug 13, down from 95.16% for the same period last year.
Rising intakes of imported iron ore fines in late July- early August period
There were some increase intakes of iron ore sintering fines among Chinese mills during the July 29 – August 11 period, despite the steel output cuts.
According to Mysteel, the daily consumption of imported iron ore sintering fines rose by 1.2% or 6,400 mt per day fortnightly to 543,000 mt per day.
Trade sources stated that some mills tried to capitalize on the recent iron ore price corrections for imported cargoes, instead of the tight domestic supplies.
Most mills were also heard to be seeking for discounted medium grade fines and low-grade fines to improve profitability and were less focused on achieving higher productivity with the intakes of high grade fines.