Domestic futures price of ferrous materials and metals including iron ore, rebar and hot-rolled coil in China declined significantly on September 16, with the most traded rebar futures contract down 1.8% on day and iron ore futures plunging by 5.1% on day. Market watchers suggested that current actual demand for ferrous commodities was not as robust as the market had long expected, Mysteel Global noted.
The most-traded rebar contract on the Shanghai Futures Exchange (SHFE) for January declined by Yuan 65/tonne ($9.6/t) from the settlement price on September 15 to close the daytime session on September 16 at Yuan 3,575/t. Also on Wednesday, the most-traded iron ore contract on the Dalian Commodity Exchange, also for January, lost Yuan 42.5/t from the settlement price on Tuesday to Yuan 796.5/t at a close on September 16.
“We cannot say the demand is very bad; what we can see is that steel demand – even in the traditional slack consuming season over July-August – is not bad this year,” a Shanghai-based steel trader told Mysteel Global.
“It’s just that the market’s expectations for steel demand during September-October have been excessively positive,” he added, indicating that the steady decline in steel prices over recent weeks was due to lower-than-expected actual demand.
A ferrous analyst based in East China’s Jiangsu province attributed the decline in rebar and HRC futures prices to the sharply dropping iron ore prices. “Steel demand is below what people had anticipated, and this – coupled with the low levels of profits the mills are making – might lead to declines in steel production,” she said, adding that the easing of congestion at raw materials receiving ports had also dampened iron ore prices.
The Shanghai-based steel trader showed little surprise at the price plummet. “When rebar futures prices declined over successive days since the start of September, iron ore futures prices decreased at a much slower pace. In any case, the high levels of iron ore prices in the early period were not reasonable so some correction might have been expected,” he maintained.
The most-traded HRC contract on the SHFE for January declined Yuan 78/t or 2.1% from the settlement price on Tuesday to close at Yuan 3,689/t when the daytime session ended on September 16.
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
Photo: World Steel
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