Iron ore futures took a breather after the recent bullish run, which led the trading session to open high only to drop later at the close.
Thus, the most-traded iron ore for January 2021 delivery on China’s Dalian Commodity Exchange booked a slight gain of 0.77% or RMB 7 day-on-day to RMB 912/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange then rose by 1.03% or RMB 40 day-on-day to RMB 3,914/mt.
Lower Brazilian shipments
The price upticks were partly supported by market concerns over tighter supply from Brazil, as miner like Vale reduced annual guidance over bad weathers.
According to Mysteel, both the Australian and Brazilian miners shipped around 23.8 million tonnes of iron ore over the Nov 30- Dec 6 period, down 2.5% or 620,000 tonnes on-week.
The weekly decline in shipment was attributed to the low Brazilian shipments at 6.5 million tonnes, down almost by 1 million tonnes on-week, which offset the higher Australian shipments done during the period.
Despite the declining shipments, most Chinese end-users prefer to procure mainstream medium grades for sintering feed, while some traders favoured Brazilian fines on more speculative interests, as they tried to resell cargoes to southern Chinese end-users.
Steel rally to flatten gradually into the new year
China’s bullish steel run may continue over the near term, before declining by the end of next year, according to the Commonwealth Bank of Australia (CBA).
According to CBA, the benchmark iron ore prices will be supported by high steel demand from China till the end of 2021, when it is expected to fall to an average price of $90/mt by Q4 2021.
The bank also expected that the high steel margins will flatten eventually after China’s infrastructure demand peaked in coming months, while the recovering Brazilian and Australian iron ore shipments will result in high port inventories among Chinese ports.
Moreover, CBA expected the China’s fiscal policy to move away from commodity intensive sectors, which might lead to slowdown in the infrastructure and property sectors in next year.