Iron ore futures dropped slightly at the afternoon close, despite a rally at the start of the afternoon trading session.
The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE), then dipped down by 0.56% day-on-day or down RMB 5.50 to RMB 982.50/mt on Thursday.
The steel rebar contract on the Shanghai Futures Exchange, followed the dip and dropped slightly by 0.23% or down RMB 12 day-on-day to RMB 5,115/mt.
Steel margins close to RMB 1,000/mt
Despite the slight dip in the future market, the Chinese steel demand remained robust, supported by higher margins.
According to trade sources, the flat steel margins were heard to reach toward the RMB 1,000/mt level, while some trade participants expected the margins to climb even higher during the peak construction season.
With the higher margins, more Chinese mills preferred to procure iron ore with higher ferrous contents and lower impurities such as Carajas fines.
In the meantime, there was also some reselling of term-contract cargoes due to the higher seaborne prices as compared to port stock prices.
Higher EAF utilization rates amid high steel prices
China’ electric-arc-furnace (EAF) capacity utilization rate rose for the sixth consecutive week, supported by higher steel prices.
According to Mysteel, the capacity utilization rate of the surveyed 71 EAF reached 72.16% as of Apr 1, up 1.61% on-week as the more EAF mills ramped up output to capitalize on higher domestic finished steel prices.
For instance, the HRB400E 20mm rebar price hiked up to a nearly decade-high prices level of over RMB 5,100/mt level in early April. Similarly, Tangshan billet prices shot up to almost 13-year high over the RMB 5,000/mt level during early April period.