Iron ore futures opened high at the start of the week, rebounding from price corrections last week, after the announcement of more commodity price controls.
The futures of Dalian Commodity Exchange (DCE) for September delivery then rose by 5.28% on-day or up RMB 55.50 to RMB 1,106/mt on Monday.
The steel rebar contract on the Shanghai Futures Exchange also went up by 2.45% or up RMB 120 day-on-day to RMB 5,027/mt.
Firm steel prices supported by low inventory
Some trade participants credited the futures gains on stabilizing steel prices and low inventory held by Chinese traders.
According to Mysteel, the rebar stocks had dropped consecutively over the three-month period to 10.7 million mt among the commercial warehouses as of May 27, down 3.8% on-week.
Thus, the steel consultancy firm predicted some upticks for rebar price during May 31- June 4 period due to the prolonged low inventory, while the Tangshan billet prices had firmed up after gaining a total of RMB 200 over the weekend to reach the RMB 5,000/mt level on Monday.
Positive economic data from China
Trade participants were also buoyed by positive trade economic data coming from China, as the country’s steel PMI index went up by 0.7 basis point on-month to 46.1 readings in May.
The reading was assessed by CFLP Steel Logistics Professional Committee (CSLPC) on May 31, signifying that steel demand remained robust despite state’s price control on commodity prices.
However, there was some concerns over stagnant economic figure on the latest official manufacturing PMI, which dropped slightly to 51 points in May, as compared to 51.1 readings in April.
The virtual flat growth traced to the week-long holidays in early May, that slowed manufacturing activities, but soon triggered record-high commodities prices that prompted the Chinese regulatory committees to step in for price control.