Ferrous Sector Money Flow: DCE iron ore aggregated open interest is up 38.97% from April 29th and reached the highest level in Q2, coking coal decreased by 18.55% during the same period. Steel, coke and flat glass used in house construction remained stable on open interest. Investors should be aware of money flow out of iron ore to other products in the ferrous sector.
China Housing Market and Construction: A sample of listed China housing companies in the year 2019 and 2020 has decreased current debt compared to 2018. In early and mid-May China saw several 100% premium land sales. Housing analysts believed the land sale premium is mostly following an after-Virus booming and should not last through the whole year.
China cement clinker utilisation rate is at 83.96%, up 0.41% w-o-w, closed to the theoretical high at 85%. The clinker utilisation rate was 70.75% at the beginning of April. The storage capacity ratio decreased from 70% to 52.2% over past month, indicating the inventories of cement are being consumed very fast. Cement is a leading indicator of construction activities, thus the significant increase in consumption would suggest rebar consumption is picking up quickly as well.
Steel Sector: Construction steels are entering another restocking period before the political conference starts on May 21st. Tangshan area has carried out environment production curb from May 18 to month end. However, this time the restriction is not so harsh and should have very limited impact on steels. The blast furnace utilisation rate is at 89.84%, which is potentially approaching seasonal high in next two weeks. Pig iron production is also reaching a ceiling.
Iron Ore: An overhaul of Dampier No.4 port for six days will keep impacting Australia iron ore deliveries. Market also panics about Brazil shipments. Vale will pick up shipments in big picture of the year, however in the short-term are still down on virus impact. Vale has resumed operation on TRMT last Saturday. Port daily drawdown has started to slightly drop and port stocks potentially keep at current level for the coming weeks.