Chinese futures moved to slight decline over industry concerns over China’s low steel demand in summer season.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, slipped slightly by RMB 3.00 or 0.40% day-on-day at RMB 738.50 per tonne on Thursday.
On the contrary, the steel rebar contract on the Shanghai Futures Exchange saw slight gain by RMB 12 or 0.34% at RMB 3,573 per tonne.
History to repeat itself
The recent flattish price movement was attributed to market sentiment that steel demand peak was over, with the rainy season in southern China and hot weather in northern China that slowed down construction activities.
Rebar inventory had climbed up at 7.97 million mt as of July 2, up 3.8% week-on-week, while rebar output was almost stagnant at 4.01 million mt, up slightly by 0.1% week-on-week, based on Mysteel data.
The high rebar inventory level was contributed by southern mills which prefer to stocked up rebar inventory and slowed down the production amid torrential rains and flood.
Meanwhile, some trade sources think that the current iron ore price movement is following historical movement seen in previous year, when iron ore prices peaked at July and started to nosedive at late July last year, due to the arrival of more Brazilian shipments.
However, some end-users remained optimistic as they expect steel demand to rise for some catch-up construction activities at late July, right after the rainy season.
Lower steel demand among ASEAN
ASEAN’s steel demand is slated to fall by 2.1% year-on-year to 79.3 million mt for 2020, due to the effects of the pandemic, according to SEAISI.
This was due to the falling construction and automotive industries for the year in view of the lockdown measures for COVID-19.
For instance, the vehicle sales in the region fell by 19.1% year-on-year in the first quarter of 2020, and the downtrend may continue throughout the year.
Moreover, the flat steel production is expected to slip to 41 million mt in 2020, from 41.8 million mt in 2019, while long steel output is estimated to drop to 38 million mt this year from 39.2 million in previous year.