Iron ore futures closed the week on slight losses, after much market rally in the week as trade participants returned from holidays.
The most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE), then fell slightly by 0.41% day-on-day or down RMB 4 to RMB 979/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange, also followed the decline and dropped slightly by 0.78% or down RMB 40 day-on-day to RMB 5,068/mt.
Lower Chinese steel inventory in early April
Chinese mills’ steel stocks fell for the seventh consecutive weeks, due to better steel consumptions amid peak construction season.
According to Mysteel, the inventory of the five major finished steel products reached 7.4 million mt during Apr 1-7 period, down 10.1% week-on-week. These steel products consisted of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plates.
Similarly, Chinese traders’ steel inventory also fell for the fifth straight week due to robust steel demand, as stockpiles recorded 28.4 million mt, down 4.3% on-week as of Apr 8.
Steel prices to ease in H2 2021
Chinese steel prices are expected to ease in H2 2021, due to expanding iron and steelmaking capacity.
According to Platts, the high steel prices recorded in Q2 2021 like rebar and billet prices were linked to supply shortages from extended output curbs in Tangshan and other regions.
In the meantime, the supply shortages coincided with the peak construction season, which saw sales of excavators in China rose by almost 46% year-on-year to 72,000 units in March 2021.
However, the construction momentum may drop in H2 2021, with some tightening measures from the Chinese authority and the local governments deleveraging of infrastructure and property market.