Iron ore futures rose on drawdown of steel stocks among Chinese traders, lifting market sentiments on better steel demand ahead.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange rose by 2.12% day-on-day to RMB 794.50/mt on Friday.
Following the rally, the steel rebar contract on the Shanghai Futures Exchange also went up by 1.09% day-on-day to RMB 3,702 per mt.
Declining traders’ steel stockpiles for the third week
Chinese traders’ steel stocks had declined for the third consecutive weeks over the Oct 23-29 period due to steady domestic steel demand, according to Mysteel.
Based on Mysteel’s survey of 132 Chinese city, the traders’ inventories of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate went down by 1.2 million mt on-week to 19.5 million mt as of Oct 29.
However, the iron ore port inventory continued to rise by 3.48 million mt on-week to high level of 127.63 million mt for the week, after surveying 45 Chinese ports by Mysteel.
More demand for low grade ores for cost-savings
More Chinese mills adopted low-grade and high-grade combination of fines in blast furnace mix to reduce production costs, prompting the premium of medium grade fines to come under pressure.
Some of the smaller mills were heard to seeking for low Indian grade Indian fines, as they are one of the cheapest fines available in the market, according to trade sources.
Some trade participants even expected further price correction on Indian fines due to improving supply after Indian monsoon season.
Meanwhile, iron ore consultancy firm, CRU expected some healthy correction in iron ore prices to drop by $100 mt by year-end and early next year, as supply chain improved and easing of port congestion in China.