Iron ore futures ended the week on high note after much rally due to robust steel demand and high steel margins.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange broke the RMB 900/mt mark and rose by 1.52% or RMB 13.50 day-on-day to RMB 902/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange also rose by 1.19% or RMB 46 day-on-day to $3,924/mt.
Inventories draw on good steel demand
The robust Chinese steel demand was evident in form of the declining iron ore and steel inventories.
As Chinese iron ore port inventory continued to decline on good steel demand at 126.05 million mt, down 1.46 million mt on-week for the week ended at Nov 27.
Likewise, the Chinese traders’ finished steel inventories also dropped to 15.2 million mt over the Nov 20-26 period, down 4.6% or 742,300 mt on-week.
According to mysteel, the finished steel inventories consisted of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate.
Despite the drawdown, some trade participants stated that the inventories drawdown moved at a slower pace, as cold weather occurred in northern China, making construction activities harder to operate, and affected rebar demand.
Lesser Indian iron ore exports ahead
Market participants expected firmer crude steel production from other Asian countries apart from China, as their economies recovered and increased their iron ore consumption.
Therefore, India might reduce its iron ore exports to cater more raw materials toward its strong domestic steel demand.
However, this had a little impact on the spot market, as most Chinese buyers prefer to procure medium grade fines, like PBF, Mac fines and Newman high grade fines for cost efficiency.