Iron ore futures reversed into losses, as market concerns over declining steel margins and the impact of rising coronavirus cases on steel demand and logistics.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) then, fell by 1.41% on-day or RMB 15 to RMB 1,046/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange also dropped by 1.94% or RMB 85 day on-day to RMB 4,288/mt.
Thinner steel margins amid winter period
The thin steel margins were due to lesser demand for construction steels amid colder weather that limited construction activities in China.
This caused Chinese rebar output to fall for the second consecutive week to 3.45 million mt over the Jan 7-13 period, down 1.2% or 41,200 mt on-week, according to Mysteel.
Likewise, the mills’ average rebar rolling capacity utilization rate also dropped by 0.9% on-week to 75.7% for the period, due to softening rebar demand from lesser operational work sites in China.
More price supports from fewer iron ore shipments
Despite the lower rebar demand, the iron ore prices might draw some supports from lesser shipments from Australia and Brazil.
According to Mysteel, the Australian and Brazilian iron ore shipments dropped to a ten-month low over the Jan 11-17 period.
During the period, Mysteel estimated the total iron ore shipment of both iron ore producing countries reached around 21.3 million mt, down 1.5 million mt or 6.6% on-week.
The declining shipment volume was due to low major miners’ shipments from Australian terminals during the period, except for mining major, FMG which increased its exports.
In the meantime, the Brazilian shipments was disrupted by the monsoon season during the period. Meanwhile, the recent fire incident in Vale’s iron ore terminal at Ponta da Madeira is not expected to have any impact on the shipments during the period.