Iron ore futures continued to rally on better steel margins and expectation of better steel demand for post-Lunar New Year period.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then surged up by 4.32% day-on-day or RMB 44 to RMB 1,062/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange also rose by 2.31% or RMB 100 day on-day to RMB 4,420/mt.
Better steel margins on reduced steel production
The recent lower iron ore prices provided better steel margins, though many mills are still in cost-saving mode from the high raw materials costs.
Thus, most end-users still prefer medium grade fines, while some mills sought for low grade fines, but avoided the more expensive high-grade fines like Carajas fines.
Meanwhile, the market participants expected steel margins to grow in anticipation of stricter supply side reforms introduced by the Chinese authority to reduce steel production to comply with reduced carbon emissions standard.
Higher rebar prices amid thin market activities
Chinese rebar prices inched higher despite thin market activities as trade participants prepared for Lunar New Year celebration in mid-Feb.
According to Mysteel, the HRB400 20mm dia rebar price went up for the second consecutive trading day by RMB 1/mt on-day to RMB 4,358/mt as of Feb 8.
Some trade sources attributed the uptick to expectation of lower crude steel production after the holidays as mills are slated to follow stricter emission control regulations.
Meanwhile, the Chinese traders’ average daily trading volume of imported iron ore port inventories had dropped by 24% on-week to 867,000 mt per day during the Feb 1-5, as most Chinese mills had completed their pre-Spring Festival restocking needs.