Iron ore futures continued to rally on market anticipation of better post-Lunar New Year demand that bounced futures contract to the RMB 1,000/mt mark.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then hiked up by 4.20% day-on-day or RMB 40.50 to RMB 1,004.50/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange also rose by 1.64% or RMB 69 day on-day to RMB 4,285/mt.
Bullish sentiment for post-Lunar New Year demand
Trade participants were upbeat about the steel demand after the Spring festival holidays, as they expected some stimulus packages from the Beijing policymakers to drive the country’s real estate sector.
However, some market participants were more cautious as the Chinese authority announced earlier to cut steel output this year to comply with the reduced carbon emission regulations, though no concrete plan had been laid out yet.
Outside of China, there were some signs of recovery for seaborne iron ore demand due to more global seaborne deliveries being recorded in January.
According to ship-tracking firm, Refinitiv, a total of 125.08 million mt of global iron ore seaborne deliveries were recorded in January, up 2% on-month, while China’s seaborne imports were estimated at 93.05 million mt in January, up from 85.35 million mt in December.
High steel stocks among Chinese traders
Chinese traders’ steel stock grew for the sixth consecutive weeks from the restocking activities and market optimism over post-Lunar New Year demand.
According to Mysteel, the traders’ steel stocks reached 21.3 million mt as of Feb 4, up 3.3 million mt on-week for steel products such as rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate.
Going forward, some market participants expect the steel stocks to grow further, as mills operate at full capacity on good post-Lunar New Year demand, which might further pressure steel prices and margins.