Chinese futures rebounded today on tighter inventory and Chinese government’s stimulus for more white goods consumption.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, increased by 2.01% day-on-day to RMB 710.50 per tonne on Thursday.
Likewise, the steel rebar contract on the Shanghai Futures Exchange also hiked up by 0.37% day-on-day to RMB 3,498 per tonne.
Lower inventory due to good consumption
Rebar inventory continued to decline since Mar 12, due to good drawdown rates from end-users, fueled by good construction demand,
By 28 May 2020, the total rebar inventory rate hovered at 11 million mt, down 2.62% week-on-week, as compared to 11.37 million mt recorded in previous week.
The current level of rebar inventory was almost halved as compared to 21 million mt recorded in 12 Mar 2020, reflecting that demand had picked by mid-Mar with higher utilization rates from mills.
Huge growth for HRC
Hot-roll coils (HRC) is expected to be bullish as the Chinese government pledged to drive more white goods consumptions.
According to iron ore data analytics company Tivlon Technologies, the lower HRC production also help to support higher prices as most Chinese mills focused on producing construction steel products.
Thus, the iron ore data analytics company expect HRC futures to outperform the ferrous complex soon, due to a shift in production for more HRC to meet higher white goods consumption.
Apparently, Chinese white goods or large electrical goods like refrigerators and washing machines had already been gaining popularity among the Southeast Asian market such as the Philippines and Indonesia, which are expected to ease their lockdowns in June.