Iron ore futures fell after a series of bullish run, as market sentiment turned bearish due to output restriction measures aimed to improve air quality.
The futures of Dalian Commodity Exchange (DCE) for January delivery then plunged by 6.65% day-on-day or down RMB 41 to RMB 575.50/mt, during the day trading session on Friday.
The rebar futures also decreased by 2.52% day-on-day or down RMB 113 to RMB 4,371/mt, during the day trading session.
Anti-smog measures to restrict output in Chinese cities
The recent market bullish came to an end, as Chinese authority implemented Level II anti-smog measures on cities across provinces like Hebei, Henan, and Sichuan during the week.
Moreover, it was heard that most mills had completed most of their restocking needs and thus with sufficient stocks at hand, most buyers were reluctant to pick up seaborne cargoes in waiting for more market clarity.
Meanwhile, the country’s steelmaking hub of Tangshan continued to be affected by the ongoing environmental curbs, which resulted mills to procure only on need basis.
Lower mills’ steel stocks due to better consumption
The recent market optimism had resulted in faster consumptions of steel among Chinese mills, as Mysteel recorded mills’ steel inventory at 5.61 million mt, down 2.4% on-week during the Nov 18-24 period.
The steel stocks consisted of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate and declined due to recent improved demand and expectation of better flat steel demand in early 2022.
Meanwhile, the blast furnace (BF) capacity utilization rates dropped for the sixth consecutive weeks to 75.23%, down 0.11% on-week, as northern China-based mills had voluntarily reduced their output during the Nov 19-25 period.