Iron ore futures opened high on morning session, only to suffer a sharp drop at the close, following a selloff session on Tuesday.
The futures of Dalian Commodity Exchange (DCE) for September delivery then dropped by 2.80% day-on-day or RMB 32 to RMB 1,109.50/mt during the day trading session on Tuesday.
The rebar futures also went up 1.30% day-on-day or RMB 74 to RMB 5,613/mt, during the day trading session.
More state intervention for output cuts
The bearish sentiment was linked to market expectation of more state interventions in asking local steel mills to trim crude steel production for H2 2021, like the mills based in the provinces of Jiangsu, Anhui Fujian and Yunnan.
Trade participants expected more output cuts to commerce in other Chinese provinces as well as Chinese authority pledged to limit their steel output this year, not exceeding previous year level of 1 billion mt.
Besides the lowering blast furnace outputs, the capacity utilization rate of the 71-independent electric-arc-furnace (EAF) steelmakers also went down by 2.83% week-on-week to a three-month low of 64.65% as of Jul 2, according to Mysteel.
Lower rebar production due to power shortages
Mysteel recorded lower rebar output at 3.35 million mt during the July 15-21 period, down 5.5% week-on-week, due to power supply cut measures in Chinese provinces of Henan, Guangxi and Yunnan.
Some trade participants expected further power saving measures to be implemented in the flood-hit Henan, affecting industrial output and steel demand.
Meanwhile, the coastal cities among eastern China came under the threat of heavy rains after Typhoon In-Fa swept pass the regions, impacting freight exports in several major ports and airports.