Iron ore futures continued to slide under selling pressures due to mixed market outlook over steel demand.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange plunged by 2.26% day-on-day to RMB 822 per tonne on Thursday.
The steel rebar contract on the Shanghai Futures Exchange also faced correction and went down by 1.60% day-on-day to RMB 3,640 per tonne.
Weaker steel prices
The declining futures market traced to softer steel prices, due to weaker than expected consumption rate which caused steel margins to come under pressure from high raw materials costs.
Moreover, the declining steel prices also did not get much support from the production restriction at Tangshan.
Thus, the price for HRB 400 20mm dia rebar dipped for the fourth consecutive trading day by RMB 10/mt day-on-day to RMB 3,845/mt including 13% VAT as of September 9, based on Mysteel assessment.
Chinese steel mills prefer drawn down their own inventories first before buying from ports stocks or importing seaborne cargoes.
Thus, Mysteel recorded a dip in steel mills’ inventory of sintering fines at 16.5 million mt for the Aug 27- Sep 9 period, down 1.2% from previous fortnight.
Growing pellet demand for winter season
The demand of pellets is expected to grow over near term as the Chinese mills prepared ahead for the winter season.
Many market participants expected stricter environmental regulations to be implemented for upcoming winter season, which will increase the usage of pellets in the blast furnace mix.
Besides, the tight supply of Indian pellets may further push up pellet prices due to Indian producers’ preference to sell pellets to their robust domestic market.
As such, the Indian pellet exports had dropped significantly by 30% month-on-month to 1.18 million mt in August, according to Mysteel.