Posted on 03 Aug 2021
The most-traded iron ore futures contract on the Dalian Commodity Exchange (DCE) for September delivery plunged by a large 8.1% on Friday, triggered by the prevailing bearish sentiment in China’s iron ore market on the likelihood of slowing demand in coming months.
The contract finally closed the daytime trading session at Yuan 1,027/dmt ($159/wmt), or down by Yuan 91/dmt from Thursday’s settlement price. On Thursday, the contract had already dipped by 1.6% from Wednesday’s settlement price, according to DCE’s data.
“Recently, all signals have indicated that many steel mills will cut their steel production between now and December, with some having already begun to do so,” a Shanghai-based iron ore analyst remarked, pointing out that the central government is exerting pressure on most provincial governments to ensure that their steelmakers must lower output.
“And if we remember that crude steel output in the first half year increased by around 12% on year, the reduction in volume in the remainder of this year will have to be substantial. Inevitably, iron ore demand will be impacted,” he added.
Mysteel’s latest data shows that steel production has slowed. The blast furnace utilization rate among the 247 steel mills monitored nationwide over July 23-29 dipped for the second week to average 86.83%, though this was lower by just 1.21 percentage points on week, as reported.
Mysteel’s other survey also showed that total production of the five major steel products among the 184 surveyed mills dipped for the second week over July 22-28 by 2.5% to 10.1 million tonnes, reaching a five-month low, with the volume also lower by 890,800 tonnes on year.
In the spot market, steel mills’ ore buying has already tended to be more cautious. Influenced by the bearish sentiment, many iron ore traders are not as strongly defending their high prices, with some even actively selling stocks at hand. This also saw iron ore spot market prices drop over the past several days, Mysteel Global noted.
In contrast, the most-traded rebar contract on the Shanghai Futures Exchange for October delivery closed the daytime trading session on Friday higher at Yuan 5,737/tonne, up by Yuan 56/t or 1% from the settlement price on July 29.
Source:Mysteel Global
