Dull demand, grim mood hit China's ferrous futures

Futures prices of major ferrous commodities in China including steel, iron ore, coke and coking coal have all declined markedly since mid-October, with contracts of the key steelmaking raw materials posting steeper losses. Market players blame rather slack steel demand and the lack of market confidence, Mysteel Global noted.

As of October 31, the last trading day of the month, the most-traded iron ore contract on Dalian Commodity Exchange (DCE) for January delivery had slumped for the fifth consecutive day by another hefty Yuan 26/dmt ($3.6/dmt) or 4.1% from the settlement price on October 28, closing the daytime session at Yuan 606.5/dmt.

Similarly, the DCE's most-traded contracts for coke and coking coal (both for January delivery) also tracked further south on Monday by 4.6% and 3.6% to close at Yuan 2,393/t and Yuan 1,865/t, having lost Yuan 553/t and Yuan 375/t from their respective highs on October 11.

"China's weakening finished steel prices and tepid steel demand have weighed on the prices of raw materials such as iron ore, coke and coking coal, while lower raw mats prices lent less cost support to steel prices in turn," a ferrous analyst in Shanghai told Mysteel Global.

The analyst's comment was well reflected in the tumble in finished steel futures on the Shanghai Futures Exchange, where the most-traded rebar January contract had declined by another Yuan 120/t or 3.4% to close at Yuan 3,397/t when the daytime trading session ended on Monday, hitting a new low since May 2020, according to the bourse's data.

Written by Zhenqi Yang, yangzhenqi@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.