Iron ore futures ended the week on high notes, due to market optimism on better Chinese steel demand.
The futures of Dalian Commodity Exchange (DCE) for May delivery rose by 2.78% day-on-day or up RMB 22 to RMB 812.50/mt, during the day trading session on Friday.
The rebar futures also rose slightly by 0.31% or up RMB 15 day-on-day to RMB 4,901/mt, during the day trading session.
Chinese steel to fill the Russia-Ukraine’s output gap
Due to the ongoing Ukraine crisis, Chinese steel might be in high demand, as China might fill in the supply gap left by both countries locked in military conflict.
According to Huatai Futures, Russian steel accounted around 10% of the of global steel trade, while Ukraine has a 4% share, while China steel accounted around half of the global share.
For instance, Ukrainian largest mining and steel company, Metinvest had suspended its two iron and steel works in the seaport city of Mariupol, after being cut off from power and communications since the Russian invasion in late February.
Metinvest accounts around 40% of the country’s steel production and Russian naval activities off Mariupol had affected the company’s steel shipments to its client.
Chinese mills to ramp up high production amid Two Sessions
Chinese mills showed some signs of higher steel output, as their blast furnace (BF) capability utilization rate hiked up by 3.88% weekly to 81.49% for the week ended on 4 Mar 2022, based on Mysteel data.
This was due to relaxation of output restriction after the Winter Olympics, though the Two Session meetings commenced this Friday in Beijing, that led to some market expectation of some scale of sintering controls to improve air quality.
Market is also expecting some stimulus packages will be introduced after the Two sessions meeting to kickstart the Chinese economy and raise steel consumption.