Iron ore futures went off the cliff on Monday due to the lower than expected steel demand and bearish market sentiment.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange went to a steep dive since opening, dropping 2.88% day-on-day to RMB 776 per tonne on Monday.
Likewise, the steel rebar contract on the Shanghai Futures Exchange followed the downtrend and dropped 1.59% day-on-day to RMB 3,539 per tonne.
Not-so-hot steel demand season
The typical peak steel demand season seemed to slow down after the first half of September and the market quickly took a turn with falling steel prices.
Thus, steel consultancy, Mysteel expected rebar prices to correct further over the Sep 21-25 period, due to the tepid pre-holiday demand.
The decline rebar prices followed last week downward trend, as the price of the HRB 400 20mm dia rebar went down slightly by RMB 1/mt day-on-day to RMB 3,795/mt for the week ended on Sep 18.
Meanwhile, it was heard that the steelmakers based in Hebei and Jiangsu may increase their output by another 50,000 mt this week to make up for the production loss in the upcoming holidays season.
Cautious buying among port stocks
China-based mills were cautious in procurement of iron ore among port stocks in view of falling steel prices over the Sep 14-18 period.
Due to lesser purchases, the iron ore inventory swelled up by 363,600 mt week-on-week to 114.93 million mt for the week ended Sep 18, based on Mysteel’s survey of 45 major Chinese ports.
Some end-users were also more interested in seeking lower grade cargoes to save costs, but the tighter supply on the low grade options had delayed their purchases.
For instance, the supply of Indian fines was tight due to strong Indian domestic market demand and port congestions that slowed Indian exports.
Meanwhile, the recovery of Japanese steel production had also limited the supply of other low grade options like Yandi fines and Robe valley fines.