Iron ore futures closed at high RMB 900s/mt, just shy of the coveted RMB 1,000/mt mark, after a week of speculative trading supported by good steel demand and margins.
The most-traded iron on China’s Dalian Commodity Exchange (DCE) then rose further by 4.38% day-on-day or RMB 41.50 to 989.50/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange, however, managed to hover above the RMB 4,000/mt mark, after slipping slightly by 0.20% or RMB 8 day-on-day to RMB 4,033/mt.
Inventory draws to push up prices
The week ended with drawdowns on both the iron ore and steel inventories, which indicated strong steel consumption in China.
For instance, the Chinese iron ore port inventories reached another low, after a huge weekly draw of 2.43 million mt of iron ore was recorded at a total volume of 122.03 million mt for the week ended Dec 11.
Similarly, Chinese traders’ steel stocks continued to drop for the ninth consecutive week to 13.7 million mt for the week ended at Dec 10, down 5.8% or 841,200 mt on-week.
According to trade sources, the steel inventory draw was attributed to the good steel demand and high steel margins, as the margins for hot-rolled coil (HRC) was estimated at around RMB 400-500/mt.
Low Brazilian shipments and possible cyclone disruption
Despite the good steel demand, there was also some market concerns over supply tightness as well, as Brazilian iron ore shipments fell to six-month low to 29.2 million mt in November.
According to the Brazilian customs, the monthly exports volume went down by 6.5% on-month and dropped slightly by 0.4% on-year, as Brazilian miners lowered their annual output guidance.
Furthermore, there might be some disruption in shipments in coming months, due to the upcoming rainy season in Brazil during the Dec-Feb period.
The Australian suppliers were not spared from unfavorable weather condition, as cyclone threat loomed at west coast Australia, which forced Port Hedland to clear large-sized vessels in preparation for expected cyclone landfall on Friday, Dec 11.