Iron ore futures rebounded from earlier losses in the morning session to close the afternoon session on positive note.
The futures of Dalian Commodity Exchange (DCE) for September delivery then rose by 1.02% day-on-day or up RMB 12.50 to RMB 1,244/mt at the close of day trading session on Wednesday.
The rebar futures continued to rally by 3.34% on-day or up RMB 176 to RMB 5,439/mt, during the day trading session.
High steel prices to lift market sentiment
The afternoon paper rally session seemed to follow the higher steel prices as Chinese authority eased output restriction in Tangshan, after political party celebration in Jul 1.
Hence, Chinese steel prices rose on better steel demand after the recent output cut and led the Tangshan billet prices to reach RMB 5,000/mt by Wednesday afternoon, up RMB 70 day-on-day.
However, some trade participants expected the rally to last for short term, as steel demand typically dipped lower during the rainy season, while Chinese authority may introduce more output cuts to comply with stricter emission regulations.
Rising scrap usage and easing of iron ore supply
China’s National Development and Reform Commission (NDRC) announced on Wednesday that the country aimed to increase steel scrap usage by 23% to 320 million mt by 2025 for steelmaking.
The plan was estimated to double the scrap usage by around 410 million mt of 62% iron ore input by the end of five-year period from the recorded 260 million mt in 2020.
Meanwhile, Mysteel expected some easing of iron ore supply from Australian and Brazilian suppliers, as most of the ports’ maintenance from both countries are slated to end by July.