Iron ore futures gave up gains and plunged in today day session, amid bearish market sentiment and thin steel margins.
The futures of Dalian Commodity Exchange (DCE) then dropped by 5.27% day-on-day or down RMB 44 to RMB 791/mt, during the day trading session on Tuesday.
The rebar futures also fell by 2.87% or down RMB 134 day-on-day to RMB 4,532/mt, during the day trading session.
Iron ore prices to follow the easing of Chinese lockdown
Despite fewer Covid cases in Shanghai, there was still no official statement to end the lockdown of city and no signs to the end China’s Covid-zero policy.
Ian Roper, commodity strategist of Astris Advisory Japan KK linked the movement of iron ore prices to Chinese response in dealing with the Covid pandemic.
During his speech to the Singapore Iron Ore Forum, he expected better steel demand to return to the market, after China phrased out its Covid-zero policy, and this might drag into the next year.
As Roper estimated Chinese steel exports to grow in 2022 in view of stronger oversea steel demand due to the global steel deficit caused by the Russia-Ukraine war, that affected steel output and exports coming out of the Black Sea region.
Cheap Russian semis flood the market
The prices of steel products had also been affected by the flood of cheap Russian semis into the market.
Initially, buyers rushed in with panic purchasing activity at the onset of the conflicts, fearing supply shortage, but soon the slow global economic activities had affected steel demand, while the buyers were well-stocked with steel products.
Hence, the export prices of Chinese steel had declined for a while, such as the China-origin SS400 4.75mm hot-rolled coil (HRC) was assessed at $776/tonne FOB from North China’s Tianjin port, down by just $4/mt on week, according to Mysteel.
Previously, the Chinese steel product faced a sharp drop of $30/mt last week, due to competitive pricings in the export market and lower demand from oversea buyers.