Iron ore futures dipped at the closing trading session, as market sentiment on iron demand remained poor due to lower steel margins.
The futures of Dalian Commodity Exchange (DCE) for May delivery fell by 3.85% day-on-day or down RMB 32.50 to RMB 812.50/mt, during the day trading session on Wednesday.
The rebar futures also dropped by 1.49% or down RMB 74 day-on-day to RMB 4,907/mt, during the day trading session.
High raw material prices that reduce steel margins
There was growing concerns on the higher raw material prices that weighed down on steel margins which was estimated at around RMB 300-500/wmt, according to Platts reports.
However, many Chinese buyers still preferred to buy from portside due to the import losses from seaborne cargoes, especially on the highly priced high grade seaborne cargoes.
As the market perceived limited availability of the high-grade ores as the European buyers shunned from purchases of high grade ores from the Russia-Ukraine region and might rely more on Brazilian high grade ores like Carajas fines or BRBF for their steelmaking needs.
Lower Chinese excavator sales to imply lesser construction activities
Chinese excavator sales went down by 13.5% year-on-year to 24,483 units in February 2022 for both domestic and overseas markets, according to China Construction Machinery Association (CCMA).
The lower sales indicated a lacklustre construction sector, due to the slowdown in Chinese property sector after a series of debts associated with developers since last year, which then cut down on new projects this year.
However, the low excavator sales may be linked to high base recorded in early 2021, due to loosing of fiscal policy then. In term of monthly comparison, the excavator sales did show an improvement by 56.3% higher in February in contrast to the low sales in January 2022.