Iron ore futures closed on negative region on Friday, after much rally throughout the week.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange suffered a pullback, dipping 1.45% or RMB 12.50 day-on-day to RMB 850 per tonne on Friday.
Similarly, the steel rebar contract on the Shanghai Futures Exchange faced correction with a drop of 1.08% or RMB 41 day-on-day to RMB 3,754 per tonne.
End of the six-day run
The pullback signified the end of the six consecutive day bullish run that tracked high steel in China, as market expert estimated the country’s annual steel output to reach over 1 billion mt for the first time by end-2020.
For the month of September, market optimism remained high as the country’s construction activities normally peaked during the September and October period.
It was more so for this year, as the Beijing policymakers introduce more new infrastructure projects, redevelopment of old residential areas and stimulus incentives for the automobile and white goods manufacturing industries to stimulate the coronavirus-hit economy.
Steel demand recovery outside China
Outside of China, some market participants expected better steel demand from other countries such as Japan.
According to trade sources, Japanese steelmakers like JFE Holdings may restart one of its two blast furnaces in October, while there were some market speculation that Nippon Steel might do the same since it had idled 6 out of its 16 blast furnaces back in February.
The resuming of blast furnaces was linked to demand recovery of flat steel and automotive sector in Japan.
Moreover, there was gradual recovery of steel production of Europe and South Korea as well, which is expected to increase the demand of Brazilian fines due to its price competitiveness and low alumina content as compared to Australian fines.