Chinese futures started the week on bullish note, amid market supply concerns and better economic data from China.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for September delivery, hiked up by 3.22% day-on-day to RMB 752.50 per tonne on Monday.
Following the rally, the steel rebar contract on the Shanghai Futures Exchange also went up by 1.25% day-on-day to RMB 3,577 per tonne.
Another supply crunch from Vale?
Market participants were concerned over another round of supply tightness from Brazil, after Vale was ordered by court to suspend one of its mine in Itabira due to coronavirus outbreak.
However, Vale reportedly reversed the court ruling, after winning an injunction and was able to maintain its mining operation in Itabira despite 200 confirmed cases.
The affected mining complex had produced 35.9 millon mt of iron ore in 2019, and any closure might prompt Vale to cut its annual output guidance of 310-330 million mt for 2020 again.
China’s construction activity surges in May
China’s construction sector is picking up and reached a high index of 60.8 in May from previous reading of 59.7, according to National Bureau of Statistics (NBS).
During the month, the sector saw new orders jumped to 58 as compared to 53.2 in April, and there was also more new hiring on the worksites.
Moreover, the high reading index was also supported by better China’s official PMI which recorded at expansion mode with the reading at 50.6 in May, but slightly lowered than 50.8 reading in April.
The main driver of the economy, however rested at the private manufacturing which reached a 9-years high with Caixin/Markit PMI reading of 50.7 in May, higher than April’s reading of 49.4 reading and beating market estimate of 49.6.