Iron ore futures maintained the bullish run on better steel demand from China due to peak construction activities season during the Sep-Oct period.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange rose by 1.06% or RMB 9 day-on-day to RMB 854.50 per tonne on Wednesday.
However, the steel rebar contract on the Shanghai Futures Exchange remained flattish with slight gain of 0.11% or RMB 4 day-on-day to RMB 3,778 per tonne.
Market optimism for September
Most of the market participants were more optimistic for steel demand in September, as most of the Chinese mills had completed their scheduled maintenance by August.
Besides, China’s rainy season is expected to end by September, and there were reconstruction works that supported steel demand at the aftermath of heavy rains and floods in southern China.
Thus, the CFLP Steel Logistics Professional Committee expect better steel PMI in September as compared to the weaker August’s steel PMI.
During August, the steel PMI recorded 47 readings, down 2.2 basis points month-on-month and indicated steel sector in contractionary mode due to unfavorable weather that affected steel demand.
Tighter supply for low grade fines among Chinese ports
Due to the high popularity of low-grade fines among Chinese buyers, there was some supply tightness for low grade fines among port stocks.
As many mills with flexible blast furnace mix, had increased their utilization of high-grade ore blending with low grade ore for better cost efficiency.
More buyers were also heard to be seeking for low grade Indian fines to boost further cost savings. However, the supply of Indian fines had been erratic due to the monsoon season that disrupted shipments.