Iron ore futures were muted following the week-long Labour Day holidays in China, though steel prices continued to climb on market optimism.
Thus, the Tangshan billet prices maintained about the RMB 5,000/mt in early May and increased further by RMB 20 to RMB 5,060/mt on Wednesday.
Record high margins for HRC
China’s domestic hot-rolled coil (HRC) margin had hit a record $177.80/mt by end-April, which propelled HRC prices to record high level at RMB 5,750/mt, according to Platts.
Meanwhile, Australian iron ore shipments to China had yet to reach similar level recorded in 2-4 years ago, while Vale’s exports had yet to recover fully from its tailing dam disasters.
Thus, Platts expects iron ore prices to rise further as supplies struggled to keep up with robust Chinese demand.
Similarly, the steel prices were expected to rise in May, due to falling steel inventories and robust orders. Therefore, the iron ore and steel prices may soften in second half of the year from slower downstream demand and tighter credit conditions.
More steel production cuts to limit iron ore demand
There were market talks of further production cuts that resulted in steel price upticks with the Tangshan billet prices bounced back to the high RMB 5,000/mt level since the start of May.
However, the anticipation of more steel output curbs might limit iron ore demand as Beijing policymakers pushed for lower steel output in 2021, by increasing imports of semi-finished steel products like billets and removal of export rebates for steel mills to focus on domestic needs instead.
Meanwhile, some market participants were concerned over further tightening of iron ore supplies from the rising Covid cases in India, which might disrupt the country’s annual iron ore exports of around 50 million mt to China.