Iron ore futures went up higher on tighter steel inventory, amid better downstream demand as trade participants prepared for the construction season.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then went up by 2.45% day-on-day or up RMB 26 to RMB 1,089/mt on Thursday.
The steel rebar contract on the Shanghai Futures Exchange, also rose slightly by 044% or RMB 21 day-on-day to RMB 4,759/mt.
Tight rebar inventory to support prices
According to Mysteel, the total rebar inventory had dropped by 1.96% on-week to 17.96 million mt for the week ended on Mar 18.
The lower inventory resulted in higher steel consumption, as the Chinese spot sales of construction steel including rebar jumped by 24.7% on-day as of Mar 17, based on Mysteel’s data.
Meanwhile, the daily trading volume of construction steel including wire rod and bar-in-coil, also rose by 41,814 mt per day to 211,348 mt per day in mid-March.
Going forward, some trade participants expected higher rebar prices in Q2, given the higher steel demand as the construction season started during the quarter.
More pellet demand amid high margins
Chinese mills were heard to increase their pellet utilization in the blast furnace mix, due to the higher lump premium from tight supply.
Besides, the steel margins remained high with trade sources citing better margins over RMB 800/mt for some steel products.
Therefore, market participants expected pellet demand to rise, despite the usual seasonal lulls during the month of April.