Iron ore futures booked slight gain after low opening, as trade participants were concerned over weak winter steel demand and declining exports volumes from China.
The futures of Dalian Commodity Exchange (DCE) for January delivery then inched up by 1.42% day-on-day or up RMB 8 to RMB 570.50/mt, during the day trading session on Monday.
The rebar futures also rose by 2.62% day-on-day or up RMB 110 to RMB 4,312/mt, during the day trading session.
Falling monthly steel exports amid power crunch
Despite the futures upticks, the market sentiments remained low over weakened steel demand during the off-peak winter season.
The low demand was evident in falling China’s monthly steel export volumes that dropped by 8.6% on-month to 4.5 million mt in October, though it achieved a yearly rise at 11.3%.
The declining exports were partly attributed to state policy to reduce steel exports after the removal of valued added tax rebates since Aug 1, while encouraging steel imports to meet the annual goal of not exceeding last year steel output.
Moreover, the power crunch also caused falling exports as more mills cut productions to conserve energy consumption, as it was estimated that Shandong-based mills had reduced around 350,000 mt of steel output during the September and October period.
Rising inventory and the growing interest in low grade fines
Trade participants were also concerned about rising finished steel inventory that were being held by Chinese mills in early November.
According to Mysteel, the inventories of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate increased for the second consecutive week to 5.67 million mt as of Nov 3, up 5.9% on-week and further uptick is expected due to strict winter output season.
Chinese mills’ blast furnace utilization rates also came to an 18-months low at 76.43%, down 2.4% on-week during the Oct 29- Nov 4 period, due to soft steel margins and restriction of steel production.
Due to the lower steel margins, many Chinese mills were heard to increase their demand for discounted medium grade fines and low-grade fines to save costs.