Chinese futures rallied throughout the week and reached almost a one-year high, upon market optimism.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, rose by RMB 8 or 1.02% day-on-day to RMB 789 per tonne, a 11-month high on Thursday.
Likewise, the steel rebar contract on the Shanghai Futures Exchange also gained by RMB 48 or 1.31% at RMB 3,726 per tonne.
Market optimism over Chinese market
The paper market rally may be traced to market optimism over Chinese economic growth for its fast industrial recovery from the pandemic.
Australia-based bank, ANZ stated that Chinese steel demand were supported by ‘rebounding property sales and stronger heavy machinery sales’ as industrial sector picked up paces after easing lockdowns.
Due to better steel outlook, Citi Research had revised its forecast and estimated China’s steel demand to grow by 3.8% from previous estimate of 4% contraction.
Indian steel demand needs two years to recover
Outside of China, the market was not so rosy as India’s steel demand was expected to need around two years for recovery back to pre-COVID 19 levels, according to government sources.
Furthermore, the country’s GDP is expected to drop by 5%-6% for the Apr 2020-Mar 2021 fiscal year due to reduced consumer spending on steel-related products like automobiles, which the auto industry is estimated to drop by 25%-40% during the fiscal year.
Due to the low domestic steel demand, India has become a net steel exporter, instead of net steel importer back in the fiscal 2018-2019 period.