Iron ore futures saw slight gains, amid bearish market outlooks on reduced steel output and slow economic activities.
The futures of Dalian Commodity Exchange (DCE) for January delivery then inched up slightly by 0.50% day-on-day or up RMB 3.50 to RMB 710/mt, during the day trading session on Wednesday.
The rebar futures however, dropped by 2.87% day-on-day or down RMB 157 to RMB 5,304/mt, during the day trading session.
Low Chinese steel PMI from power crunch and steel output curbs
China’s Hebei steel PMI fell to 19-month low at 43 readings in September, according to Hebei Metallurgical Industry Association.
The declining PMI indicated lesser new orders for steel mills based in Hebei, the country’s top steel producers amid ongoing steel output curbs and power rationing policy implemented on the province.
The country’s average steel capacity utilization also fell to 83.5% in September, down from 85.3% in August, and some trade participants expected lower steel utilization throughout the month of October in view of slowing construction activities.
Declining property sectors to affect steel consumption
Chinese home sale by value also fell 16.9% on-year in September, while the of floor area of new construction projects had dropped by 13.5% yearly at the start of October.
The average cost of a new home also fell by 0.1% on-year in September for the first monthly decline since May 2015, according to the country’s National Bureau of Statistics.
Apparently, the property sector had been cooling down, suffering from the tumults of the debt ridden Evergrande Real Estate Group, one of the country’s largest property developers.
Thus, trade sources expected residential construction activities to slow down in medium term, affecting the steel consumption for construction materials as well.