Posted on 12 Nov 2021
By the end of daytime trading session of November 11, China's ferrous futures prices including steel, iron ore, coke and coking coal all jumped, and the most-traded hot-rolled coil (HRC) contract even hit its daily limit up of 8%, as the market was more hopeful of some positive changes at the start of next year.
The most-traded January 2022 rebar on the Shanghai Futures Exchange (SHFE) grew Yuan 307/tonne ($48/t) or 7.4% from the settlement price of Wednesday when closing at Yuan 4,443/t, the January HRC contract reached Yuan 4,696/t, or up 347/t, according to the exchange.
Several positive factors have been behind the rises in steel futures, among which are the rebound in thermal coal futures, signs of loosening control on the domestic property market, and steel mills' disagreements on the continuing slumps in steel futures prices that had been against the real fundamentals, market sources shared.
"China's thermal coal futures prices have been stabilizing and rebounding, giving a fillip to the market sentiment for ferrous commodities in general," a futures analyst from East China's Shandong commented.
On Thursday, the most-traded January 2022 thermal coal contract on the Zhengzhou Commodity Exchange regained Yuan 34.2/t or 3.9% from Wednesday's settlement price to Yuan 905.4/t by the end of the daytime trading session.
It was commonly understood that the latest round of tumbles in China's ferrous futures was triggered by Beijing's intervention in thermal coal prices, and the coal futures rebound has been interpreted as a sign of the possible end to the latest downward corrections.
Besides, "the control on Chinese banks' lending to both property developers and individual buyers seems to have been loosened, which is an encouraging sign to the steel market," commented a market source from South China's Guangdong.
A Shanghai-based steel analyst viewed the recovery in the steel futures as a market move to narrow the too-wide spread against the physical steel prices, as "steel producers have been unanimously resisting the sharp slumps in futures prices, thinking it has deviated too much from the reality and rationality," he commented.
The gap with probably be narrowed with steel futures prices to regain some lost ground as physical steel price may stay on the downtrend for a while, according to him.
As of Thursday, the spread of the rebar futures and physical prices in Shanghai was narrowed to Yuan 417/t from the recent peak of Yuan 790/t on November 2, according to statistics of SHFE and Mysteel.
On Thursday, the most-traded January 2022 iron ore and coke contracts on the Dalian Commodity Exchange (DCE) recovered too, both up 6.8% from Wednesday's settlement prices at the close, with the former up Yuan 36.5/dmt to Yuan 570.5/dmt and the latter up Yuan 195.5/t to Yuan 3,090.5/t, according to the official data, which was just following the steel futures, according to market sources.
"Iron ore futures price, for example, can hardly find much support from the fundamentals with weakening demand yet abundant supply," an iron ore trader from East China's Zhejiang commented, "but ferrous commodities have been moving together in China, so it will just tag along with the steel futures prices" he predicted.
It is too early to see whether the upward correction in ferrous futures will be sustaining or for how long, he admitted, as despite the market prospect, actual steel demand tends to be weak in winter or for the start of a new year, and this will be the case for 2021 and 2022, Mysteel Global understood from the market.
Source:Mysteel Global
