Iron ore futures rose for the third consecutive days since start of the week due to robust Chinese steel demand.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange hiked up by 0.88% or RMB 7.50 day-on-day to RMB 857 per tonne on Wednesday.
However, the steel rebar contract on the Shanghai Futures Exchange went down by 1.15% or RMB 44 day-on-day to RMB 3,794 per tonne.
Preparation for peak Sep-Oct period
The strong buying interest among Chinese end-users got to do with the traditional steel demand boom season in the September and October period.
Furthermore, there was also some catch-up demand since June due to gradual economic recovery from the coronavirus pandemic.
Demand of the medium grade fines remained strong among Chinese mills. However, the recent price rally had led some small and medium steelmakers to consider cheaper alternatives like the Indian fines to blend with high quality domestic concentrates to save costs.
Thus, steel consultancy, Mysteel noted that there was slight increase in iron ore concentrates output in July at 23.8 million mt, up 0.3% year-on-year, as domestic miners maximized their concentrates production to take advantage of rising prices and demand.
Typhoon Higos to disrupt southern China steel demand
Despite the price rally, there was some market concerns over the supply disruption caused by tropical Typhoon Higos as it made landfall at southern China.
According to Mysteel, there was some short-term disruption to regional steel market in Zhuhai city at Guangdong province due to torrential rains.
As all major construction works were halted in the region due to the strong winds and floods that affected logistics.
However, the typhoon later weakened, which led other southern Chinese cities like Hong Kong and Macau to downgrade their typhoon warnings and resumed public services.