The most-traded iron ore futures contract on the Dalian Commodity Exchange (DCE) for January 2022 delivery plunged to a four-month low on Thursday as market worries about shrinking iron ore demand turned market sentiment bearish.
The contract finally closed the daytime trading session on Thursday at Yuan 888.5/dmt ($137.4/wmt), down by Yuan 44/dmt or 4.7% from Wednesday’s settlement price. The contract even hit as low as Yuan 872.5/dmt during the day, DCE’s data showed.
“Market sentiment is quite weak now as many iron ore traders – including us – expect ore demand to decline further in the future,” a Shandong-based iron ore trader in East China said. “Beijing’s target to lower crude steel output this year seems unchangeable, and many steel mills here (in Shandong) have begun to control their production, with their iron ore procurement also decreasing,” he added.
The trader noted that his company has already sold off all ore quantities at hand, and that many other traders are also actively destocking and are no longer defending their prices so as to minimize any losses. “Currently, we’re tending just to observe the market: it is absolutely not a good to do any trading,” he said.
A Shanghai-based iron ore analyst with a futures company also attributed the slump today to further confirmation that steel mills will cut their steel output.
“In fact, over the past several days some market participants were thinking that maybe the central government would be less strict in enforcing the steel production cut, but soon they realised that this would be impossible,” he said. “That’s when market sentiment turned even more bearish.”
He noted that overseas iron ore demand might have hit a ceiling too, while iron ore supply will continue to recover in the future, with the mismatch also weighing on ore prices.
According to China Iron & Steel Association’s latest data, daily crude steel output among its member mills reversed down during the ten days over July 21-31 to 2.11 million tonnes/day on average, or slipping 4% from the average over July 11-20, which was also 3% lower on year.
As of July 29, the inventories of imported iron ore at China’s 45 major ports under Mysteel’s weekly survey stood at 128.1 million tonnes, or 14.1 million tonnes higher on year. Moreover, by the same day a total of 168 iron ore vessels were queuing at the ports awaiting unloading, up 16 on week and another high level, according to Mysteel’s data.
Written by Victoria Zou, zyongjia@mysteel.com
Photo credit: World Steel
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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