Weak market fundamentals see DCE iron ore futures dive 5.4%
The DCE's most-traded iron ore contract for May delivery had closed the session on February 20 at Yuan 909.5/dmt ($126.4/dmt), the lowest level since early December 2023, Mysteel Global noted.
Behind the drastic fall in iron ore futures is the actual weakness in steel and iron ore fundamentals in China after the holiday, which eroded market confidence about any forthcoming rise in near-term iron ore demand.
In fact, after the end of the CNY, market sentiment was predominantly impacted by the slow pace of the recovery in domestic steel demand, a Shanghai-based market watcher remarked.
On Tuesday, the third working day in China after the holiday, evidence of improving steel demand nationwide was scarce and so steel sales were sparse, she said.
Additionally, market expectations for a gradual recovery in domestic steel consumption in coming days faded in response to predictions for unfavorable weather in many regions, which steel market players fear will delay the resumption of work on outdoor construction sites which in turn will undermine steel sales.
Also on Tuesday, China's National Meteorological Center issued the highest warning in its three-tier warning system, announcing that most regions should brace for a cold wave and that temperatures will drop by 8-12 degrees Celsius over February 20-23. The same day, the Center issued warnings for snowstorms and freezing weather in some provinces in North, Central and East China.
This severe weather alert only served to intensify the concerns of market insiders that in the short term at least, steel market fundamentals will worsen further, Mysteel Global noted.
Exacerbating the depressed market mood is also the steady rise in steel inventories in retail markets since late last December because of the winter lull. Mysteel's latest survey found that by February 17, the stocks of the five major finished steel products held by traders in 132 cities nationwide sampled by Mysteel had accumulated to nearly an 11-month high, jumping by 15.6% from that on February 8.
On the other hand, the slower-than-expected resumption of blast furnace operations among domestic mills after the CNY holiday has acted as a more direct constraint on iron ore demand, Mysteel Global noted from market sources.
Written by Lea Li, liye@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
WEEKLY: China mills' iron ore stocks drop after holiday
May 09, 2024 16:00
MYSTEEL: Demand to still buttress China iron ore prices in May
May 08, 2024 18:45
WEEKLY: China iron ore prices to rise on firm demand
May 07, 2024 15:30
WEEKLY SUMMARY: China's iron ore prices mixed, spot coke rises
Apr 29, 2024 11:20
WEEKLY: China mills' restocking needs weaken for iron ore
Apr 25, 2024 17:30