Iron ore futures started the week on gains, due to market optimism over easing of mortgage rates that supported the Chinese construction sector.
The futures of Dalian Commodity Exchange (DCE) for the most-traded September iron ore contract then hiked by 4.41% day-on-day or up RMB 36.50 to RMB 863.50/mt, during the day trading session on Monday.
The rebar futures however dipped slightly by 0.15% or down RMB 7 day-on-day to RMB 4,604/mt, during the day trading session.
Lower rebar prices expected in late May
Rebar prices were estimated to soften over the May 23-27 period, due to rainy weather in southern China that dampened steel demand, according to Mysteel.
The consultancy firm also highlighted that the covid restriction measures remained in some of the major Chinese cities like Shanghai that limited steel demand.
Moreover, the Chinese daily crude steel production also went downtrend to an average of 2.92 million mt per day during the ten-day period in mid-May, down 3.9% year on year, and down 0.4% on weekly basis.
The daily output rate consisted of electric arc furnace (EAF) and blast furnace production and was affected by the recent EAF maintenance period that led to lower daily output.
More stimulus for Chinese property market
Steel demand was also buoyed by the recent adjustment of the five-year loan prime rate (LPR) by 15 basis points to 4.45%, or China’s biggest reduction of interest rate since 2019.
Market expected the lower interest rates to have a direct impact to the debt-ridden Chinese property market, which might drive housing sales after Chinese property sales dropped to 16 years low in April.
Moreover, the Beijing policymakers also make it easier for large and state-owned developers to raise funds, relaxing rules on escrow accounts for pre-sale funds and allowing some local governments to cut mortgage rates and down-payment ratios.
All these measures were estimated to support the construction sectors that will raise the steel demand to build properties and infrastructures.