Iron ore futures suffered a sharp fall just the close at the morning session, then moved flattish at the afternoon session amid thin steel margins and falling steel prices.
The futures of Dalian Commodity Exchange (DCE) for January delivery then fell by 1.10% day-on-day or down RMB 6 to RMB 540/mt, during the day trading session on Tuesday.
The rebar futures also dropped by 1.50% day-on-day or down RMB 63 to RMB 4,128/mt, during the day trading session.
Falling iron ore shipments fail to support prices
There was some improvement in the Tangshan billet prices which posted gain of RMB 30 on-day to RMB 4,180/mt during the afternoon session, but market sentiments remained bearish due to negative steel margins and falling rebar prices.
As domestic rebar prices continued to drop to nearly an 8-month low at RMB 4,759/mt during mid-November, while rebar output declined for the second consecutive week to 2.8 million mt over Nov 4-10 period, after northern China-based mills reduced production due to cold winter.
However, the low iron ore shipment might provide some supports to iron ore prices, as the total Australian and Brazilian iron ore shipments dropped to a 7-month low of 21.6 million mt during Nov 8-14 period, down 12% on-week due to terminal maintenance works.
Chinese EAF mills’ margins fall on low steel prices
China’s electric-arc-furnace (EAF) producers were not spared from the low steel prices and saw their profitability shrank for the fourth consecutive weeks.
According to Mysteel, the average steel margins for EAF reached RMB 190/mt as of mid-November, down RMB 170/mt on-week. However, Mysteel claimed that some of the northern China-based EAF mills had already went into losses with negative steel margins, due to the bearish steel demand.
Moreover, the Chinese steel mills’ margins for rebar and HRC were faring poorly as well, as rebar and HRC margins were estimated at around -$11/mt and -$8.63/mt respectively during mid-November, according to Platts.