Iron ore futures dipped at the close, despite opening higher at the start of the morning session due to market uncertainty over steel demand.
The futures of Dalian Commodity Exchange (DCE) for January delivery then tanked by 8.70% day-on-day or down RMB 8.70 to RMB 650.50/mt, during the day trading session on Thursday.
The rebar futures also dropped by 8.01% day-on-day or down RMB 433 to RMB 4,976/mt, during the day trading session.
Falling steel prices and uncertainty on steel demand
Some market participants linked the futures drop to declining steel prices, as domestic rebar prices failed to recover from a weeklong slump.
According to Mysteel, China’s national price of HRB400E 20mm dia rebar dropped for the eight consecutive day to RMB 5,792/mt as of Oct 20, down RMB 28/mt on-day, amid bearish market outlook on steel demand.
Likewise, the Tangshan billet prices moved flatly over the past few days at around RMB 5,170/mt levels, due to market expectation of prolonged steel output cuts and power crunch that affected industrial operations.
More price interventions on commodity from state authority
Trade participants also had concerns over more state intervention on price control from commodities, as the China’s National Development and Reform Commission (NDRC) declared its intent to set price limits and profit levels for coals.
Some participants saw this ‘price law’ to ease the power crunch in China, due to high thermal coal prices amid tight supplies.
However, some market participants believed it to impact met coal as well and might impact steel prices indirectly. Plus, market feared similar measures may extend to other raw materials pricing as the authority deemed fit.
Meanwhile, the steel market will soon enter the traditional off-season for steel consumption during winter period, which China Iron & Steel Association (CISA) expected low steel prices ahead, in view of slowing economic activities in China.