Iron ore futures jumped with the return of Chinese trade participants from the holidays and good economic indicators in China.
The most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange then surged by 4.80% day-on-day to RMB 830 per tonne on Friday.
The steel rebar contract on the Shanghai Futures Exchange then posted gain of 2.25% day-on-day to RMB 3,633 per tonne.
V-shape recovery from the pandemic
China’s Caixin/Markit services PMI rose to a three-month high reading of 54.8 in September, implying the service sector was recovering well from the pandemic.
The high reading was driven by fast recovery in the domestic supply and demand in the services sector, while the overseas demand was muted as new export business remaining in contractionary territory for around seven of the last eight months.
The high service economic reading was matched by the country’s official manufacturing PMI at 51.5 in September, while the private manufacturing survey or Caixin/Markit PMI recorded at 53.1 reading, indicating the manufacturing sector in expansion mode.
Due to the good economic indicators, many market experts believed that China may be the only major economy to register positive growth for the coronavirus-hit 2020.
More sintering restriction ahead
Despite the good economic indicators, some trade participants still adopted mixed market outlook, due to concerns over the sintering restrictions in Tangshan and thinner steel margins.
Thus, some end-users may try to maximize production efficiency and seek more of medium and high-grade fines, such as Carajas fines.
Other steel mills then may try to reduce production costs by using more low-grade fines or increase usage of discounted fines.