Posted on 03 Nov 2021
On November 2, both iron ore and steel futures prices in China slumped further and hit their respective daily limit down on the growing bearish sentiment in these domestic ferrous markets.
On Tuesday, the most-traded January 2022 rebar contract on the Shanghai Futures Exchange (SHFE) plunged by Yuan 368/tonne ($57.5/t) or 8% on from Monday's settlement price to close the daytime session at Yuan 4,230/t, and the most-traded January 2022 iron ore contract on the Dalian Commodity Exchange (DCE) slumped Yuan 62.5/dmt from Monday's settlement price when closing the daytime session at Yuan 565.5/dmt.
"DCE's iron ore futures hit its daily limit down first during the daytime trading and then the SHFE steel futures, but I'd say the two had just influenced each other (instead of being the cause and effect)," a futures analyst from Southeast China's Fujian commented, as "in general, the whole ferrous market sentiment has been rather bearish," he pointed out.
As for iron ore, the core concern is about oversupply, as demand is expected to weaken together with domestic steel demand, production, and prices, while iron ore supply has been stable, and the other negative factors such as Beijing's continuing intervention in coal-related commodities prices and softening in freight charges for dry bulk carriers have also intensified the market pessimism, he elaborated.
In contrast, imported iron ore inventories at China's 45 major ports under Mysteel's survey had been mounting, reaching 144.9 million tonnes as of October 28, or a new high since April 5 2019 and up another 11.7 million tonnes on month, and another 190 vessels laden with iron ore were queuing at these ports for unloading.
As for the domestic steel market, the concern on demand is rather overwhelming even though the country's steel output is likely to decline further with the wide-range restriction nationwide either because of power rationing or winter restrictions, market sources shared.
"Steel futures prices have slumped markedly, as market sentiment has been seriously challenged with the persistently poor steel demand," remarked a ferrous commodities analyst from East China's Shandong, and "the fast retreat in steelmaking raw material prices has triggered sharp downward correction in steel prices," she added.
"We estimate that China's apparent steel consumption has been over 25% lower on year for weeks now including the first week of November, and we are talking about actual demand, so now it is no longer just about end-users' staying away from the market because of price fluctuations," she elaborated.
Some steel traders in North China have even started planning a longer break and close their shops earlier than usual for the upcoming Chinese New Year holiday if the poor sales persist, she shared.
Usually, China's steel traders suspend business one or two weeks before the public holiday for a longer celebration of the Chinese New Year (CNY), and for 2022, the official holiday will be on January 31-February 6, Mysteel Global notes.
Mysteel's survey indicated a similar trend, as spot trading volume of construction steel including rebar, wire rod and bar-in-coil among China's 237 steel traders averaged 175,957 tonnes/day in October, or down 27.9% on year.
Source:Mysteel Global
