Chinese futures faced a correction on Wednesday after a recent rebound, due to market concerns over second wave of coronavirus in Beijing.
Thus, the most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, dropped by 1.22% day-on-day to RMB 766.50 per tonne on Wednesday.
Meanwhile, the steel rebar contract on the Shanghai Futures Exchange, was also flattish and traded slightly down by 0.19% day-on-day to RMB 3,585 per tonne.
Beijing declares emergency to contain virus
Trade participants were spooked by the second wave of coronavirus outbreak in Beijing that prompted the authority to raise emergency levels to curb human movement.
The second wave came just when economic activities are returning to normal in the country and market participants were concerned if more stricter lockdowns measures will be imposed in wider regions and affected steel demand.
Besides Beijing, the rainy season in southern China may also bring some near-term pressure to iron ore demand with disruption in steel demand and logistics.
Chinese mills run near full capacity in June
Despite market concerns for second wave of coronavirus outbreak, the steel production had grown to a fast pace since the start of June.
According to China Iron and Steel Association (CISA), the first ten days of steel production had surpassed the level for the same period last year.
This was due to Chinese mills running at near full capacity despite weaker downstream steel demand in southern China from heavy rains.
However, steel margins had decreased, thus the Chinese buyers had sought for mid-grade fines like for Pilbara Blend fines, Newman fines and MAC fines for cost savings.