Iron ore futures extended the rally from last week, as market prepared for the peak construction season in upcoming Sep-Oct period.
The futures of Dalian Commodity Exchange (DCE) for September delivery then inched up by 0.66% day-on-day or up RMB 5.50 to RMB 835/mt, during the day trading session on Monday.
The rebar futures followed the rally and rose by 4% day-on-day or RMB 206 to RMB 5,354/mt, during the day trading session.
Steel prices uptick for upcoming peak season
According to trade sources, steel prices are likely to rise during the week of Aug 30-Sep 3 period, due to lower inventory of rebars among Chinese traders.
Besides, most of the Chinese steel mills had kept blast furnace capacity utilization stable at 85.3% as of Aug 26, down slightly by 0.17% on-week, due to the ongoing output cuts.
As market participants were optimistic about the upcoming traditional peak steel demand in Q3, though there were concerns about adverse weather conditions and higher Covid infection rates that threatened growth.
Higher rebar output despite ongoing production cuts
Perhaps, the better market outlook was captured in the rising rebar production, as Mysteel recorded rebar output grew for the third consecutive weeks, despite strict output cuts.
Chinese rebar production reached 3.27 million mt, up 0.8% or 27,000 mt on-week, during the Aug 19-25 period, as mills prepared for the traditional peak construction season ahead.
However, the output level was lowered than previous year when weekly average output leveled at 3.49 million mt per week.
This was due to the ongoing steel production cuts that Beijing policymakers pursued for H2 2021. As part of the environmental emissions cut, while some trade participants expected tougher cuts as part of the Beijing Winter Olympics preparation at year-end.