Iron ore futures continued to rally higher after early losses occurred at the start of the week over concerns for stricter output curbs.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then rose for the second consecutive trading day by 2.78% day-on-day or up RMB 28.50 to RMB 1,053/mt on Wednesday.
The steel rebar contract on the Shanghai Futures Exchange, followed the rally and surged up by 2.12% or up RMB 100 day-on-day to RMB 4,816/mt.
Steady Chinese steel demand in Q2
Trade participants expected steady downstream steel demand in China, given the traditional construction season and sought for medium to higher grade fines, amid output restriction in Tangshan.
According to trade sources, the high-grade fines were much sought after by the Chinese buyers for their blast furnace efficiency.
Meanwhile, the demand for iron ore lump is also supported by supply tightness, while there was also spot demand coming from Japanese end-users that lifted the lump premium, especially for April loading Australian cargoes.
High global steel output in February
Global crude steel output jumped by 4.1% on-year to 150.2 million mt in February, according to World Steel Association (WSA).
China had contributed the largest share with total crude steel output at 83 million mt, up 11% on-year, while other countries’ steel production dropped due to the coronavirus pandemic.
Despite the high production level, China imported lesser iron ore at 90.5 million mt in February, a five-month low, and down 0.55% on-month with significant lower import of Australian iron ores due to unfavorable weather conditions.
However, the country imported more iron ores from Brazil and India, due to better weather conditions in Brazil, while China also doubled pellet import from India on competitive pricings and delayed implementation of export tariffs by the Indian authority.