Market Summary：
Steel:
– The speculators used to long U.S. linked commodities and short CNY linked commodities come to an end as currency become less sensitive to stimulus plan. Construction steel trading volume dropped by 50% from late December 200,000 tonnes to 100,000 tonnes by end of January. Steel bank construction steel inventories up 17.31% w-o-w. Last Thursday Mysteel data indicated construction steel inventories up 10.57% w-o-w. Steel entered a quick restock cycle, thus very few physical traders were willing to speculate on stocks, when holding risks were higher than potential gains. Hebei province transportation recovered as all cases were found in quarantine crowd, which would not create new round of infection in unexpected areas.
– Tangshan billet profit fell to negative area. Steel makers were stuck into less demand and high iron ore cost. As a result, billet price were almost flat to above 3800 yuan area over entire January.
Iron ore:
– As the vanish of western Australian Hurricane as well as PDM announced no impact on delivery after fire accident, iron ore speculators evaporated over weekends. Iron ore market in DCE witnessed a 37.78% position loss from mid– December. DCE iron ore may contract was stuck into a narrow range from 1018.5-1084.5 during most of January.
– Iron ore port stocks maintained around 124 million tonnes over past four weeks, expected to slight increase since port congestion expected to ease before Chinese New Year in mid-February. MySteel 247 sample steel mills operation rate decrease by 2.35% during this January, however utilization rate decrease by less than 1% at the same period, indicating big mills were still running at high capacity. A significant marginal decrease on demand need to see a decrease on big mills production. Carajas fines were contributors to structural shortage, however major mid-grade brands were sufficient in supply.