Chinese futures changed little as the market tried to end the week on positive note with huge drawdown of port inventory.
Thus, the most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, rose slightly by 0.13% day-on-day to RMB 768 per tonne on Friday.
Likewise, the steel rebar contract on the Shanghai Futures Exchange, increased by 1.14% day-on-day to RMB 3,645 per tonne.
A big catch-up for Vale’s shipment
Brazil’s Vale may struggle to meet its annual guidance of 310-330 million mt for 2020, even after Vale’s reopening operation in the coronavirus-hit Itabira mine complex.
According to cFlow, Platts trade-flow algorithm, Vale might need to raise its monthly shipment volume by 9 million mt on top of an average of 18 million mt per month over the Jan-May period, in order to balance its tonnage guidance.
Therefore, some market participants expect Vale to catch up with its iron ore shipment at the second half of year if it wanted to maintain its annual guidance.
However, some trade sources were more bearish and expected only around 290-300 million mt of iron ore to arrive in China for 2020, in view of supply disruption caused by rainy season and rising coronavirus cases in the Brazil.
Port inventory falls for the ninth consecutive weeks
China’s low iron ore port inventory continued to support iron ore prices, as stockpiles fell for the ninth consecutive weeks.
According to Mysteel’s survey of 45 Chinese ports, the total iron ore inventory stood at 106.17 million mt, down 805,400 mt week-on-week for a ninth straight week.
The lower inventory indicated strong steel demand in China which drew down portside stocks. As market participants expect more stimulus packages in later half of the year, after China’s Vice Premier Liu He’s speech on Thursday, hinting more flexible monetary policy.