Iron ore futures extended bullish run over higher steel output and prices that drove improvement in steel margins.
The futures of Dalian Commodity Exchange (DCE) for January delivery then rose by 1.83% day-on-day or up RMB 11 to RMB 611.50/mt, during the day trading session on Thursday.
The rebar futures also increased by 0.86% day-on-day or up RMB 38 to RMB 4,471/mt, during the day trading session.
Lower steel consumption till year-end
Despite the market optimisms, there was some market concerns over lower steel consumption in China, as Platts assessed the country’s manufacturing production index went down by 13 points on-month to 102 reading in October.
The decline was due to slow production of engineering machinery, home appliances and vehicles during the month, which may extend to lull winter period into early 2022.
The slowdown of China’s property construction activities also contributed to the downfall, as the lower land purchases and home sales were expected to continue into 2022, despite Chinese authority’s effort to ease credit borrowing to healthy property developers.
Consumer sector to lead flat steel growth
Trade participants were more optimistic of steel demand in 2022, in anticipation of more stimulus packages aiming at consumer products like electric cars and smart home appliances.
For instance, market expected more demand for flat steel products like HRC and CRC as China’s vehicle productions are likely to ramp up in early 2022, with the easing of chip shortages.
Moreover, the country’s shipbuilding and container production are estimated to rise in 2022 as well due to strong exports with high newbuild order received in 2021.