Money Movement. According to China commodity exchange statistics, agricultural sector money inflow increased 14.99% in the days before Golden Week. The industrial sector increased 23.99%, the petrochemical sector contributed most, up 38.3%. The ferrous sector was up 16.88% over the same period, underperforming other industrial sectors including non-ferrous. Within the ferrous sector, iron ore money inflow was much lower compared to coal and steels.
Steel Sector. Tangsong Index researchers indicated a production curb will tend to have smaller impact before November and potentially become harsher after November if Tangshan pollution levels increase. Five typical steel mills inventories are still 45% higher than previous four years average from mySteel data.
In the best case, it is still hard to get close to the previous year’s level by the end of 2020, since the Golden season for steel sales is past. Daily steel trading volume dropped from 250,000 tonnes to 220,000 tonnes from early to late October. SHFE rebar Jan contract is the typical contract that reflects winter stock values. However mills tend to have some discount on winter stock to clear most of their inventories and maintain liquidity before Chinese New Year. As a result, Jan Rebar has limited room for speculation historically and seasonally.
Iron Ore. Australia and Brazil iron ore deliveries were at 25m tonnes last week, up 1.05m tonnes w-o-w. Australia and Brazil iron ore deliveries ranged from 22-25m tonnes from mid-May. China port arrivals also recovered to 22-25m tonnes weekly, after port congestion slightly eased in Q3. However weekly draw of around 22.05m tonnes in September and October, caused port stocks to rise. Port stocks were up 11.26m tonnes to 122.86m tonnes.
Daily pig iron production dropped from 2.53m tonnes in mid-August to 2.47m tonnes last week. Blast operation rate dropped from 91.9% to 88.41% over the same period.
From Bloomberg, Vale’s Q3 production was 88.7m tonnes, up 2.28% y-o-y. First nine months production was 215m tonnes, down 3.5 y-o-y. Rio Tinto’s Q3 production was 86.4m tonnes, down 1% y-o-y. Iron ore Q3 deliveries were 82.1m tonnes, down 5% y-o-y. BHP Q3 production 74.15m tonnes, up 7% y-o-y. First nine months in 2020 production was 218m tonnes, up 7% y-o-y.
In general, iron ore seems to be in a short-run bearish trend since a limited steel price has restricted the margin room and a recovery in deliveries has co-incided with slower demand.