Iron ore futures inched up further today, following the rally at the start of the week on market optimism over steel demand.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then hiked up by 1.81% day-on-day or RMB 20.50 to RMB 1,153.50/mt on Wednesday.
The steel rebar contract on the Shanghai Futures Exchange also surged up by 3.86% or RMB 180 day-on-day to RMB 4,842/mt.
More blast furnaces maintenance ahead
The high steel prices were attributed to seasonal construction demand and reduced steel productions. As more blast furnaces are expected to undergo scheduled maintenance, during the Two Sessions meeting which is slated to end by mid-March.
Moreover, the Chinese authority had restricted truck delivery between steel mills and ports since early March, while Caofeidian port had reduced shipping discharge rates by last week.
The rationale for limited port operations was to curb steel mills inventory and reduce steel production to improve air quality and cut carbon emission.
The wait for supportive steel policies
According to trade sources, some buyers prefer to wait at sideline for more updates on steel-related policies from the outcome of the Two Sessions meeting.
Thus, most of the buying activities were focused on medium grade fines as more buyers prefer restocking of port stock iron ore in small quantities as compared to taking whole vessel of iron ore cargoes, amid price volatility.
Meanwhile, there was growing Chinese buying interest for low grade fines, due to better supply conditions in India, and the cheaper coke prices in domestic China that allowed more tolerance of intaking iron ore with higher impurity contents.