Chinese futures faced correction after recent rally as buying interests slowed, while steel demand came under threat from rainy season.
Thus, the most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, dropped down by 2.12% day-on-day to RMB 737 per tonne on Thursday.
Likewise, the steel rebar contract on the Shanghai Futures Exchange also went down by 0.93% day-on-day to RMB 3,606 per tonne.
Buyers find iron ore price too high for purchases
Some buyers found that seaborne prices had rose too high over the $100/mt mark and waited for some corrections before making further procurement decision.
The Brazilian high-grade ore went up even higher over $110/mt level due to the supply concerns, which prompted more buyers to seek for Australian medium grade ores.
Thus, many Chinese end-users had increased the usage ratio of PBF at blast furnace, replacing Brazilian ores for cost efficiency.
Besides, there were much availability of Australia iron ores in the market, supported by firm shipments that made Jimblebar and Yandi fines popular among Chinese mills.
Better Chinese steel margins from construction boom
Steel margins remained high in China, driven by more construction activities in May, as the country eased lockdown measures.
Thus, the domestic rebar margins averaged $71.28/mt in May, up from $56.43/mt the month before, due to higher construction demand in the country.
However, some market participants were concerned about the rainy season in June, which is likely to affect steel demand and logistics in southern China.