Iron ore futures continued to slide on softer steel demand, as slow consumption contributed to higher mills’ steel stocks.
The futures of Dalian Commodity Exchange (DCE) for January delivery then fell by 5.56% day-on-day or down RMB 37.50 to RMB 637.50/mt, during the day trading session on Friday.
The rebar futures however, rose by 0.80% day-on-day or up RMB 37 to RMB 4,646/mt, during the day trading session.
Falling steel demand leads to mills’ stocks buildup
The lacklustre steel demand had resulted higher finished steel products among 184 Chinese steel mills recorded at 5.35 million mt as of Oct 27, up 6.4% on-week, according to Mysteel.
However, the Chinese retail steel stocks dropped to nearly nine-month low level at 18.6 million mt over the Oct 22-28, down 3.7% on-week, as traders tried to offload steel products ahead of off-peak winter season.
Some trade participants expected the low steel consumption to persist throughout the winter season, in view of the stricter sintering curbs and steel output restrictions implemented by Chinese authority.
Slow property demand in Q4
Market participants expected lower construction steel prices in wake of the China’s debt-ridden property sector that affected construction activities.
Market confidence for the sector was at all-time low after the embattled property developer, Evergrande struggled to pay off its loan interest in September, stroking market fear of a next ‘Lehman Brothers’ event.
Evergrande eventually managed to avert default with last minute interest payment before the deadline on Friday, though the action failed to lift market sentiments.
Meanwhile, most of the Chinese banks had tightened their financing on property market, which some trade sources expected that to undermine the sector growth till Q2 2022.