Iron ore futures slumped due to winter off peak season, dropping to a year-low in view of strict production restriction and sintering curbs imposed on Chinese mills.
The futures of Dalian Commodity Exchange (DCE) for January delivery then plunged by 9.95% day-on-day or down RMB 62.50 to RMB 565.50/mt, during the day trading session on Tuesday.
The rebar futures also nosedived by 8.00% day-on-day or down RMB 368 to RMB 4,230/mt, during the day trading session.
Slowing steel demand amid winter off-peak season
Bearish market outlooks on low steel demand resulted the benchmark iron ore futures to drop to its daily trading limit on Tuesday morning session, despite China reported faster factory output in October with a four-month high Caixin PMI reading at 50.6.
As steel consumption is expected to struggle with poor property and infrastructure construction activity, while some trade participants believed that the steel production restriction may extend toward the winter Olympics early next year.
The slowdown in Chinese steel production may continue in November, as Mysteel reported daily crude steel output average at 2.58 million mt per day in late October, the lowest level since March 2020.
Steel prices to reflect more on market fundamentals
Despite the series of corrections for steel prices, Mysteel expected some rebounds on Chinese domestic steel prices in November, as prices will reflect more on market fundamentals rather than speculation.
As Mysteel believed that the market will soon return to equilibrium after a succession of easing raw material prices for steelmaking like iron ore and coking coal prices.
However, the overall market sentiments remained bearish as Mysteel recorded growing iron ore inventory recorded in Chinese ports at 146.5 million mt this week, up by 4.05 million mt on-week, with stable shipments from Australia and Brazil, amid slower Chinese steel demand during Q4.