Iron ore futures rallied to record high level due to robust steel demand and market concerns over extensions of output curbs to other Chinese provinces.
The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE), for September delivery then jumped by 4.33% day-on-day or up RMB 47.50 to RMB 1,144.50/mt on Monday.
The steel rebar contract on the Shanghai Futures Exchange, also hiked up by 2.34% or up RMB 123 day-on-day to RMB 5,371/mt.
Production curbs shift southwards
The paper market reflected market optimism on higher iron ore prices due to the supply tightness of medium and high-grade fines that were sought after by Chinese mills for cost-efficiency.
So far, the Chinese steel prices were supported by stricter emission control regulations with market talks of output curb moving toward southern Chinese province of Jiangsu.
Meanwhile, tougher production control measures were expected to be implemented on the major steelmaking hub of Handan, after an official notice.
Pre-holiday restocking activities to support higher rebar prices
Chinese rebar and wire rod prices are expected to inch up slightly over the April 25-30 period due to restocking activities ahead of Labour Day holidays in early May.
According to Mysteel, the commercial rebar stocks had declined for the seventh week as of Apr 22 and sat at a low level that urged more end-users to replenish their stocks during the week.
Meanwhile, the rebar production continued to grow for the fifth consecutive week to 3.61 million mt for the week ended Apr 21, up 0.7% on-week to meet the robust construction demand, based on Mysteel’s data.