Iron ore futures fell on Monday, over market concerns of tightening steel outputs, despite better steel prices.
The futures of Dalian Commodity Exchange (DCE) then slumped down by 6.65% day-on-day or RMB 51.50 to RMB 723/mt, during the morning trading session on Monday.
The rebar futures, however went up by 1.71% day-on-day or RMB 92 to RMB 5,473/mt, during the day trading session.
Better steel prices for the week
Market participants still expected more steep steel production cuts in near term, and were reluctant to commit for iron ore purchases, thus procurements were done at smaller lots.
However, the steel prices got a boost from the limited production that resulted Tangshan steel prices to rise at the RMB 5,100/mt level at the start of the week.
Thus, Mysteel expected further upticks in steel prices over the Sep 6-10 period, especially for rebars, due to better consumption.
As rebar stocks had dropped for the fifth week by 1% on-week to 11.3 million mt as of Sep 2, among Chinese commercial warehouses’ stocks.
Rising rebar production for the peak season
Chinese rebar production reached 3.35 million mt for the Aug 26 – Sep 1 period, up 2.2% week-on-week, according to Mysteel.
The increasing output was due to higher rebar prices and better demand during the peak construction period that many market participants were anticipating.
However, the rebar production levels were lower than previous year average production at 3.82 million mt per week, because of the ongoing steel output cuts adopted by Chinese authority.
Thus, the China Iron & Steel Association (CISA) also recorded lower daily crude steel output at an average of 2.05 million mt per day during the Aug 21-31 period, down 4% from the previous 10-day period and down 2.3% on yearly basis.