Iron ore futures extended gains on Friday, despite slowing demand and improvement in the buildup of steel stocks.
The futures of Dalian Commodity Exchange (DCE) for January delivery then increased by 2.23% day-on-day or up RMB 16.50 to RMB 755.50/mt, during the day trading session on Friday.
The rebar futures also rose slightly by 0.11% day-on-day or up RMB 5 to RMB 4,711/mt, during the day trading session.
Rising steel stocks amid recent slowdowns
Some trade participants expected better steel demand in March, as the output curbs and the strict environmental controls were had ceased by then, while more stimulus package or fiscal policies will be implemented then to spur economic growth.
Meanwhile, domestic demand had slowed down recently ahead of the Lunar New Year holidays, which resulted mills’ steel stocks to increase over the week, due to low consumption.
According to Mysteel, Chinese mills’ stock increased by 42,400 mt on-week to 4.24 million mt as of Jan 19, after surveying 184 mills holding rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate stocks.
Similarly, Chinese traders’ steel stocks rose for the third consecutive week to 15.03 million mt as of Jan 20, up 6.6% on-week, due to thin steel demand.
Growing daily steel production in mid-January
China-based mills had increased their daily crude steel production by 34,500 mt/day or 1.4% to an average of 2.52 million mt over the ten days period to mid-January, according to Mysteel.
This was due to some mills had resumed operations after completing their scheduled maintenance periods, while some mills increased their productions after complying with stringent environmental regulations.
However, some trade participants expected some lower daily crude steel production rate in the near term, due to anticipation of output curbs during the Winter Olympics period.