Dalian Commodities Exchange (DCE) ended the Monday afternoon session on positive due to tighter supply and anticipation of demand uptick after the Golden week holidays, reports FIS.
DCE Iron Ore Futures Contract
The most actively iron ore futures contract on the DCE, for January 2020 delivery, went up by 2.50% on-day to RMB 655.50 a tonne by day-end.
Rebar contract in the Shanghai Futures exchange also went up by the end of Monday afternoon session at RMB 3,470 a tonne, up 1.05% on-day.
Post Golden week uptick
- Market participants are expecting Chinese mills to restock after the week-long National Day holidays.
- Many China-based steel mills were believed to be running low on inventories and another round of restocks will take place after the holidays.
- There were some market concerns over the stricter environmental regulation after the holidays that may dampen this demand for raw materials.
For instance, if the Chinese authorities relaxed on the output curb, the end-users will procure more iron ore for higher production.
But things may go south if the Chinese authorities imposed stricter environmental regulation which limited steel production and raw material consumption.
Tighter Supply from big miners
Another market concern was rooted on tighter supply from big suppliers. Apparently, the port inventory had dropped around 2.2 million mt for week ended on 27 Sep 2019. This was due to fewer iron ore fines shipment arrivals to Chinese ports.
There was also some speculation of shortage in Newman and Jimblebar fines due to BHP’s mine maintenance in Western Australia as well as port maintenance.
However, these supply concerns had been dismissed by BHP with pledges to commit iron ore shipments to meet all customers’ commitment.
On the other hand, the market had plenty of Carajas fines supply which may appeal to the Chinese buyers in complying with the stricter environmental restrictions imposed by the authority.
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Source: FIS
