Iron ore futures plunged on the market opening and ended the five consecutive trading days of gains, due to slower steel demand.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange went down by 1.25% day-on-day to RMB 787/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange were flat at RMB 3,719 per mt, due to mounting market concerns over high inventory.
Slowing steel output prior to winter season
China’s daily crude steel output reached an average at 2.93 million mt per day over the Oct 16-30 period, down 0.5% or 14,900 mt per day as compared to mid-Oct period.
The decline was due to slowing construction activities, as the mills were prepared for the anticipated stricter environmental controls and output cut during winter season.
Meanwhile, the bi-weekly production of iron ore concentrates went up slightly by 2.1% to an average of 539,100 mt per day over the Oct 16-29 period, based on data from Mysteel.
Despite higher daily output, the concentrates stocks had reached a new low at 2.1 million mt, as mills continued to draw on concentrates inventory for higher utilization in blast furnace mix.
High port inventory dampens demand outlook
China’s port inventory recorded 128.95 million mt as of Oct 30, an eight-month high and rose for the sixth consecutive week, based on data from SteelHome consultancy.
Going forward, more steel mills were heard to restock for pellets with lower alumina contents to prepare for the stricter output curb during the winter season.
The demand for mainstream fines then came under doubts with the upcoming winter output cut, thus some trade participants expected more price corrections ahead.