Iron ore futures closed in negative regions, despite a late morning rally to push prices higher, amid thin steel margins environment.
The futures of Dalian Commodity Exchange (DCE) for January delivery then fell by 5.10% day-on-day or down RMB 27.50 to RMB 511.50/mt, during the day trading session on Thursday.
The rebar futures also inched down slightly by 0.05% day-on-day or down RMB 2 to RMB 4,169/mt, during the day trading session.
Steel margins turn negative for long and flat products
Steel margins continued to stay in negative sides as Platts estimated Chinese steel mills margins at negative $9.08/mt and $10.88/mt for rebar and HRC respectively as of Nov 17.
The negative margins provided little incentives for mills to produce flat steel, which resulted lower HRC inventories among traders’ inventories in eastern Shanghai, down 13% in mid-November than at start of the month.
Likewise, rebar inventories plunged by 34% during Nov 1-17 period as traders eased restocking activities due to concerns over slowing property construction activities that might last beyond Q1 2022.
Stimulus packages to focus on EV and renewables
Some trade participants expected some stimulus packages to be introduced in December, after the China’s Central Economic Work Conference held in Beijing.
The outcome of the conference may set stimulus packages aiming to boost consumption-related sectors in 2022, which then increased the consumption of flat steel products into the new year.
Some of the manufacturing sectors like electric vehicles may be one of the stimulus packages, as market participants expected that the chip shortage will have eased around Q1 2022, while other stimulus projects may target home appliances and renewable energy projects, like solar and hydro-power plants.