Chinese futures dipped further on lower buying interest, as buyers were turned off by high seaborne prices and preferred port purchases.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, slid down by 0.93% day-on-day to RMB 746 per tonne on Friday.
Following the downtrend, the steel rebar contract on the Shanghai Futures Exchange also went down by 1.15% day-on-day to RMB 3,604 per tonne.
Big drawdown on port inventory
Due to high seaborne prices, the iron ore buyers had preferred to purchase from port stocks, which resulted a huge drawdown on port inventory.
As such, the iron ore port inventory dropped by 311,500 tonnes week-on-week to 107.54 million tonnes for the week ended on June 5, according to MySteel survey of 45 Chinese ports.
In the meantime, domestic concentrates are gaining popularity among Chinese mills, as they are used to mixed with imported low-grade sinter feed, which are more economical than using high grades options in the blast furnace mix.
China to keep global steel demand afloat
China is expected to lead the global steel demand as its economy is normalizing fast toward pre-COVID conditions, according to World Steel Association (WSA).
For instance, the country’s steel sector was almost back to full productivity or 90% by end of April 2020.
Meanwhile, the steel markets in Europe, North America and India are expected to take longer time to recover due to their automotive and mechanical industries being heavily affected by the coronavirus outbreak.
Overall, the WSA estimated the global steel demand to drop by 6.4% to 1.65 billion tonne this year.