Iron ore futures fell on the close, despite opening high at the afternoon session before slumping toward the end, due to slower steel demand.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange went down by 0.63% day-on-day to RMB 786.50/mt on Wednesday.
The steel rebar contract on the Shanghai Futures Exchange, however, went up by RMB 37 or 1% day-on-day to RMB 3,753/mt.
Softening winter steel demand
Trade participants were concerned over softer winter demand for steel, in anticipation of upcoming stricter output cut and environmental controls.
There was also less buying interests among trading houses due to high inventory, while the demand for low grade fines were likely to drop due to narrowing spread between medium and low grade fines.
Thus, there was some improvement in portside liquidity for mainstream fines like Pilbara Blend fines, due to the recent price corrections that attracted more buying activities.
China’s steel PMI reaches a 9-year high
Iron ore futures did not find much support from record-high China’s steel Caixin PMI, which recorded at 53.6 in October, a nine-year high and up 0.6 points from 53 readings in September.
The uptick was due to higher steel output and rising new orders, driven by stimulus plans on infrastructures and consumers goods.
Moving forward, China Iron and Steel Association (CISA) expects stable steel demand in November supported by the export market, though steel production is slated to dip due to upcoming winter season.