Iron ore futures fell due to waning pre-Lunar New Year restocking activities and slower steel demand.
The futures of Dalian Commodity Exchange (DCE) for January delivery then dropped by 2.35% day-on-day or down RMB 17 to RMB 705/mt, during the day trading session on Monday.
The rebar futures also dipped by 2.04% day-on-day or down RMB 95 to RMB 4,553/mt, during the day trading session.
Rangebound steel prices from waning restocking activities
Due to the subdued steel demand, Mysteel expected prices of rebar and wire rod to be traded rangebound over the Jan 17- 21 period, as most mills have finished their replenishment for the upcoming Lunar New Year holidays.
Some mills were also heard to be taking breaks and undergo scheduled maintenance ahead of the Spring festival holidays that reduced steel production.
Moreover, market sentiment on steel demand for construction sector remained poor due to softening property markets, though there was improvement in steel consumption for manufacturing sector.
Meanwhile, China’s central bank has lowered the borrowing costs of its medium-term loans for the first time since April 2020. The latest easing of bank loans did not have a positive effect to spur the market, but lowered investors’ confidence instead, indicating an imminent economic slowdown in China.
Falling crude steel output due to emission curbs
China’s crude steel production dropped for the first time in six years, due to stringent emission control and tightened environmental curbs.
According to National Bureau of Statistics (NBS), the country produced 1.03 billion mt of crude steel in 2021, down 3% on-year from 1.065 billion mt of production recorded in 2020.
The lower production was in line with Beijing policymakers of not exceeding 2020’s crude steel production in view of overcapacity and the country’s effort in reducing pollutants and greenhouse gas emissions as part of their long-term goal of reaching carbon peak by 2030.
Hence, the crude steel production experienced a slowdown significantly during the second half of 2021 with output of 470.86 million mt, down 16% yearly during the Jul-Dec 2021 period.