Iron ore futures rebounded from previous trading losses, lifted by market sentiment of rising daily steel production in early June.
The futures of Dalian Commodity Exchange (DCE) for September delivery then hiked up by 1.03% on-day or RMB 12.50 to RMB 1,223.50/mt on Thursday.
The steel rebar contract on the Shanghai Futures Exchange, also went up slightly by 0.26% or up RMB 13 day-on-day to RMB 5,101/mt.
High daily steel output in June amid output cuts
According to China Iron & Steel Association (CISA), the daily crude steel output rose by 2.2% to a daily average of 2.34 million mt per day, during the first ten days of June.
The daily average steel output in early June was much higher than the beginning of the 2021 by 22.5%, despite the production restrictions in place for more emission cuts.
Hence, the high daily steel output of Jun 1-10 period had boosted market confidence on steel demand in the otherwise typical lull steel demand season.
In the meantime, the data also indicated that extended production cut in Tangshan did not dent overall steel mills’ production to meet demand.
Lower daily crude production recorded in May
Despite higher daily steel output in June, the daily crude steel production remained low in May, reaching an average of 3.208 million mt per day, down 1.6% month-on-month, according to China’s National Bureau of Statistics.
The drop in daily output was linked to various steel output cuts being imposed by the Chinese authority, during the second half of May.
Meanwhile, the profit margins of domestic HRC and rebar jumped to record high level by mid-May at $278/mt to $275/mt, only to drop later with state interventions to curb commodities prices.
Thus, the Chinese domestic HRC and rebar margins had later dropped to $155/mt and $149/mt respectively, over the June 1-15 period.