Iron ore futures maintained bullish run over market optimism for restocking demand and better steel margins from higher steel prices.
The futures of Dalian Commodity Exchange (DCE) for January delivery then hiked up by 4.14% day-on-day or up RMB 28.50 to RMB 717/mt, during the day trading session on Thursday.
The rebar futures also went up by 1.63% day-on-day or up RMB 72 to RMB 4,494/mt, during the day trading session.
Good steel demand backs by fiscal policies during H1 2022
Chinese trade participants expected Beijing policymakers to extend the monetary and fiscal policies being introduced in December to continue well into the new year.
According to trade sources, these policies will support upward movement of flat steel prices and demand and encourage better steel consumption in early 2022.
Moreover, there was low finished steel inventory among Chinese mills during December, and these shortfalls were being brought forward in the new year, which may intensify iron ore restocking activities to replenish stocks.
Lower oversea demand for Chinese manufactured goods in H2 2022
The demand for Chinese manufactured goods may decline further during the second half of 2022, in view of tightening US monetary policy and more competitions from recovering ex-China manufacturing hubs.
According to Platts, some trade participants expected Chinese steel productions to increase during Jan-Feb 2022 period, but only to decline later especially in the second half of 2022.
As more industries and manufacturing hub based in Southeast Asia were expected to resume full production after recovering from the effects of the pandemic, while China’s zero tolerance stance in handling the pandemic may result in more massive lockdowns and hurt industrial output.