Iron ore futures ended the week on gains, after a late session rally driven by good steel margins and prices.
Thus, the most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange went up by 1.72 % or RMB 15 day-on-day to RMB 887.50/mt on Friday.
The steel rebar contract on the Shanghai Futures Exchange also inched up by 1.07% or RMB 42 day-on-day to $3,977/mt.
Drawdown of iron ore and steel stockpiles
China’s iron ore and steel inventories continued to decline due to high steel demand, based on data from Mysteel.
According to Mysteel, the Chinese mills’ finished steel stocks came to a 10-month low at 5 million mt over the Nov 12-18 period, down 3.6% on-week.
The stockpiles consisted of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate. Among these products, rebar stocks were much sought after as construction firms rushed to complete building projects before the winter season.
The good steel demand also resulted in a draw for port iron ore inventory as portside stocks dropped by 263,000 mt week-on-week to 127.51 million mt for the week ended Nov 20.
Stimulus for automobile consumption
China’s robust steel demand may further be driven by white goods or home appliances and automobiles, as the Beijing policymakers planned to push stimulus in these sectors.
For instance, the Chinese authority planned to launch a new promotional campaign to lift auto sales in rural areas, by offering subsidies to new car owners.
So far, China’s domestic auto sales had been on the uptrend and reached 2.6 million units in October, up 12.5% on-year.
In the meantime, home appliances like refrigerator also attracted much sales and resulted in higher output at 8.8 million units during October, up 25.8% on-year.