Iron ore futures closed the week on positive note, after much rally on the week due to market talks over easing of output restrictions.
The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE), for September delivery then inched up by 0.92% day-on-day or up RMB 9.50 to RMB 1,046/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange, however dipped slightly by 0.14% or up RMB 7 day-on-day to RMB 5,116/mt.
High steel production over Q1
The paper rally was linked to better Chinese steel demand with high margins that resulted Chinese mills to produce 271.04 million mt of crude steel in Q1, up 15.6%, according to National Bureau of Statistics (NBS).
In the month of March alone, China had produced 94.02 million mt of crude steel, a seven-month high and up 19% year-on-year.
According to World Steel Association (WSA), the global steel demand is expected to grow by 5.8% on-year to 1.874 billion mt in 2021, and China is slated to play an important role with estimated demand growth at 9.1% this year.
However, WSA expected a slowdown in 2022 with Chinese steel demand growth estimated at 3%, as the effects of stimulus policies would be wearing off by then.
Steel inventories drop for consecutive 8-weeks on good consumption
Chinese mills’ steel stocks continued to dip consecutive for nearly two months due to high steel consumption.
According to Mysteel, the steel stocks of 184 Chinese mills recorded at 7.1 million mt over the Apr 8-14 period, down 4.3% on-week, for the five finished steel products like rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate.
Similarly, Chinese traders’ steel stocks also dip by 5.2% on-week to 26.9 million mt as of Apr 15, comprising of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plates stored in warehouses.
Trade sources attributed the lower inventory to high steel consumption during the construction season, while the ongoing output restriction and inspection safety checks resulted in overall high steel margins.