China's ferrous futures suffer a 'Black Friday'
The most-traded iron ore contract on the Dalian Commodity Exchange (DCE) for September delivery, for example, closed the daytime trading session on Friday at Yuan 645/dmt ($95.5/dmt) – down by another Yuan 72/dmt or 10% from Thursday's settlement price and a new low since late February.
The most-traded rebar contract on the Shanghai Futures Exchange for October delivery also plunged on July 15, closing the daytime session at Yuan 3,589/tonne, down by another Yuan 279/t or 7.2% from the settlement price of July 14 and refreshing a near eight-month low.
Meanwhile, the Dalian bourse's most-traded September contracts for coke and coking coal also dropped on Friday, shrinking by 7.3% and 5.7% from Thursday, to close at Yuan 2,543/t and Yuan 1,964.5/t, DCE data show.
"China's property market issue and the slack steel demand in summer were still the major drivers for the sharp corrections in steel prices over the past several days," a Zhejiang-based analyst with a futures company in East China commented. "And when the low prices are preventing steelmakers from earning any money when selling their finished steel products, it's inevitable that many are planning more maintenance to trim their production further. No surprise that raw mats prices are dropping too," he explained.
Specifically, for iron ore, the production controls that steelmakers are implementing are threatening ore demand and prices, especially when iron ore supply has seen gradual growth recently, other market sources also noted.
According to Mysteel's latest data, over July 8-14 the blast furnace capacity utilization rate among the 247 Chinese steel mills under Mysteel's survey had dropped for the fourth straight week by another 1.7 percentage points on week to average 84.01%.
Regarding ore supply, over July 4-10, the 45 Chinese ports received around 28.3 million tonnes of ore, up by a substantial 6 million tonnes or 27.1% on week and hitting a new high since May 1 2020 when Mysteel launched the shipment survey. However, the average daily iron ore discharge rate from these 45 ports only totaled 2.7 million tonnes/day, down by 144,600 t/d or 5% on week and the lowest since late March.
In fact, on Thursday, Mysteel SEADEX 62% Australian Fines had slid to $99.95/dmt CFR Qingdao, the first time since last December 2 that the seaborne cargo price has ended below $100/dmt.
"For the near future, any price recovery in ferrous commodities will depend on domestic steel demand. If that demand remains sluggish, for whatever reason, it might be still hard to see any improvement in the prices of related products," a Shanghai-based analyst also predicted.
Written by Victoria Zou, zyongjia@mysteel
Edited by Zhenqi Yang, yangzhenqi@mysteel.com
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