Iron ore futures closed the afternoon session on high, following the uptick in the morning session amid strong steel demand.
The futures of Dalian Commodity Exchange (DCE) for September delivery then rose by 4.32% on-day or up RMB 51.50 to RMB 1,242.50/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange, however inched down slightly by 0.18% or down RMB 10 day-on-day to RMB 5,610/mt.
Lower iron ore imports and high steel output
Some market participants traced the good market outlook to lower iron ore exports from Brazil and Australia, which dropped by 2.24 million mt on-week to 22.58 million mt for the week ended on May 14, based on Mysteel’s data.
In the meantime, Chinese steel production showed no sign of slowing with crude steel output recorded at 97.9 million over Jan-Apr period, up 13.4% on-year, despite pressures from Beijing policymakers to reduce carbon emission from steelmaking.
Meanwhile, the Chinese mills continued to enjoy good steel margins with the focus on using medium grade fines in steelmaking, while there was also buying interests for higher ferrous content and lower alumina fines like the Brazilian fines.
More stability in the steel and iron ore market during H2 2021
Beijing policymakers stated that more measures will be taken to ensure commodity prices following market fundamentals instead of speculations.
According to the country’s National Development and Reform Commission (NDRC), the producer price index (PPI) rose at its fastest pace in three years in April 2021, caused by sharp jump in iron ore and steel prices.
However, the commission expected the country’s PPI to cool in the second half of the year with more market regulations to curb price gouging, collusion, and irregularities especially in steel and iron ore market.
Furthermore, the NDRC will accelerate domestic mine exploration, develop overseas iron ore mines and expanding import channels to stabilize iron ore supplies.