Iron ore futures rose at the day session, as the Chinese trade participants returned from the long holidays period.
The futures of Dalian Commodity Exchange (DCE) rose by 1.87% day-on-day or up RMB 16 to RMB 871.50/mt, during the day trading session on Thursday.
The rebar futures also hiked by 1.23% or up RMB 60 day-on-day to RMB 4,923/mt, during the day trading session.
Drawdown of scrap stocks amid slower recycling activities
Despite the rising futures, the market was worried about slow steel consumption as evident in the slow drawing of Chinese scrap stocks during April.
According to Mysteel, the stocks of processed and unprocessed steel scrap had gone down during April, after recording stocks upticks for consecutive two months.
As the data of China’s Ministry of Industry and Information Technology indicated a total of 1.1 1 million mt of processed and unprocessed scrap by end-April, down 5% month-on-month.
The drawdown was linked to slower recycling activities in the Chinese domestic market, though the Chinese steelmakers were heard to be active in scrap procurement. In the meantime, many mills preferred to source for iron ores instead as part of their restocking activities before the long holidays in early May.
Higher daily steel output despite Covid spread in China
Chinese daily crude steel production had increased in late April, as mills ramped up production late in the month, despite the strict Covid restriction measures.
Based on Mysteel, the daily crude steel production went up by 49,200 mt/day or 1.7% to hit an eight-month high of 2.89 million mt/day over the last 10 days of April.
The uptick in production was due to improved coronavirus situation in East China, where Chinese authorities relaxed some Covid measures and allowed better autonomy for mills to raise their output.
However, there was market concerns over slower economic growth in China, as the recent official Purchasing Managers’ Index (PMI) recorded at 47.4 reading for April, a two-year low.
Similarly, the Caixin services purchasing managers’ index (PMI) went to record low at 36.2 readings in April, as the Chinese economic activities contracted under Covid measures that were widened among China’s coastal areas.