Iron ore futures ended the week on sharp drop on morning session, despite some recovery late in the afternoon session.
The futures of Dalian Commodity Exchange (DCE) for September delivery then slumped by 7.49% on-day or down RMB 95 to RMB 1,173/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange, also plunged down by 5.98% or down RMB 359 day-on-day to RMB 5,641/mt.
Four-month low steel stocks on good consumption
Perhaps the late afternoon futures recovery pointed to the market confidence in Chinese steel demand, despite overheated market speculation seen earlier in the week.
As China-based mills’ steel stocks dropped to a 4-month lows to 5.7 million mt during the May 6-12 period, down 11.5% on-week, according to Mysteel.
The steel stocks consisted of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate, and showed significant drop of rebar stocks by 14.5% on-week, due to good steel consumptions.
Similarly, the Chinese traders’ steel stocks also fell on weekly basis by 5.2% over the May 7-13 period to record a total of 23.3 million mt, as end-users’ restocking activities continued after the long holidays.
More Chinese authority intervention in the market
The futures correction also reflected trade participants’ anticipation for more direct or indirect government intervention in the overheated market.
For instance, the DCE had responded immediately to the super rally on Monday by setting trading limits and increasing margin requirements on the following trading day.
Moreover, the Chinese authority in Tangshan also stated that it will investigate into illegal market manipulations that hoarded up goods, spread market rumors to jack up prices and benefited from the upticks.