Iron ore futures opened lower, but ended slightly higher on a late market rally, following better economic indicators from China.
Thus, the most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange went up by 0.28% or RMB 2.50 day-on-day to RMB 908.50/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange, however continued to drop for the second consecutive day by 0.69% or RMB 27 day-on-day to $3,892/mt.
China’s Caixin PMI at a decade high
China’s private PMI hit a 10-year high in November, as the country’s manufacturing sector recovered back to pre-COVID 19 level.
During November, the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 54.9 readings from October’s 53.6, due to strong rebound in market activities from infrastructure-driven stimulus and pent-up consumer demand.
The Caixin PMI focused mainly on private manufacturing firms and the record-high economic indicator was in line with the country’s official PMI recorded at 52.1 in November, which focused more on state-own-enterprises.
Domestic steel prices to fall gradually in December
The recent steel rally is expected to flatten out in December with lower domestic steel prices, as demand slowed toward winter season.
Rebar demand is expected to decline following the slowing down of construction activities, while rebar stocks grew slightly higher at 0.2% on-week to 2.3 million mt over the Nov 19-25 period.
However, Chinese manufacturing sector’s steel demand is slated to rise, due to better sales of household electrical appliances like refrigerators, microwaves and so on.
Thus, Mysteel estimated China’s steel consumption to increase by 10% on-year in December, due to the strong support from manufacturing sector that is estimated to rise by 15% on-year.