Macro and Money Movement. Financial markets remained conservative prior to the US election which both Europe and the US registered a second round of the pandemic. Many countries’ Covid-19 infections have created single day high. From China Exchange data, equity and industrial commodity sector markets showed a correction. The agricultural commodity sector was supported. China commodity exchange data showed ferrous commodity sector open interest down 13% from the same period last year, however the margin size is similar to last year since prices are much higher.
Steel Sector. Some eastern steel physical traders indicated HRC export boomed in September and early October, with exports becoming weak again when entering late October. HRC futures are supported because Tangshan started several rounds of production curbs. MySteel data indicated construction steel daily trading volume is holding around 230,000–240,000 tonnes, which was a seasonally high level, however a marginal increase is not expected by most physical traders.
Iron Ore. MySteel data show Australia and Brazil deliveries gradually picked up since port maintenance ended at early October. Thus China port arrivals created a surplus of almost 2m tonnes versus port draws on a weekly basis. Bloomberg data indicated port congestion also eased and caused more ships carrying ore to enter port areas. MySteel blast furnace operation rate decrease from 91.9% in mid-August to 88.41% last week. During the same period, MySteel estimated daily pig iron production dropped from 2.52m tonnes to 2.45m tonnes.
The iron ore market is experiencing a surplus from the past two months. However this surplus could extend to potentially end of year since 150 ships are on the line at port areas, which will counted into port stocks in due course. Current shipments will keep adding numbers to port stocks since daily draws are not able to match supply. Moreover, Vale last week sent Q3 report and from the data, it is confident of meet its production and delivery targets.