Iron ore futures maintained its upward climb after recent rally, driven by better steel margins from anticipated stricter environmental curbs.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange booked a small gain of 0.71% day-on-day to RMB 779.50/mt on Thursday.
Similarly, the steel rebar contract on the Shanghai Futures Exchange also went up by 0.69% day-on-day to RMB 3,668 per mt.
Stricter environmental curbs and output cut in winter season
Trade sources attributed the recent market uptick to the expectation of stricter environmental controls and output cut in the winter season that supported steel margins.
The stricter environmental emission control may also affect logistics in limiting trucks movement to key steelmaking hub like Tangshan and the port areas.
Moreover, the anticipated stricter sintering cuts may also support the demand for pellets and lumps in near term, though there was much availability of lump supply in the market.
Meanwhile, Jimblebar fines remained popular among Chinese buyers due to the higher quality of Fe content in recent cargo arrival.
FMG expects record-high Chinese crude steel output in 2020
Australia’s Fortescue Metals Group (FMG) predicted China’s crude steel production to hit record-high this year, which supported higher iron ore demand.
So far, Chinese crude steel production went up by 4.5% year-on-year to 781.6 million mt over the Jan-Sep 2020 period and helped to drive the iron ore rally.
Thus, the miner had shipped 44.3 million mt of iron ore for the September quarter, and its iron ore cargoes were sold at the average of $106/mt for the quarter, up almost 25% year-on-year.
Despite the strong Chinese steel demand, FMG will maintain its guidance at the range of 175-180 million mt for FY 2021.