Chinese futures ended the afternoon session on gains and continued the rally seen last week in view of market optimism and possible supply tightness from Brazilian suppliers.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, rose by RMB 38 or 4.80% day-on-day to RMB 829 per tonne on Monday.
Likewise, the steel rebar contract on the Shanghai Futures Exchange also gained by RMB 36 or 0.97% at RMB 3,739 per tonne.
Lower rebar output from Chinese mills
Chinese mills have reduced their rebar production by undergoing for scheduled maintenance for their machinery, while some of them disciplined their output since last week to support prices.
As such, Chinese mills’ production of construction steel products went down by 3% week-on-week to 5.5 million tonnes for the week ended at July 9, according to Mysteel.
The lower of rebar output also reflected market concerns over the lower steel demand in southern China during the rainy season that limited construction activities.
Supply tightness from Brazilian suppliers due to rising COVID-19 cases
Trade participants were concerned if the rising coronavirus in Brazil may invite stricter lockdown measures that affect iron ore shipments.
Currently, the number of coronavirus cases in Brazil ranked second in the world after the US, and previously the Brazilian iron ore exports were down 29% year-on-year to 21.50 million mt in May.
Many trade participants then expect a catchup of Brazil iron ore shipment during the second half of year to fill in for the shortfall, but the rising coronavirus might restrict logistics and resulted in supply tightness.