Chinese iron ore prices edged higher, while steel futures were little changed in early trade on Thursday as still-high inventories cooled hopes of a strong rebound in prices when demand picks up as construction activities resume next month.
The most-traded iron ore contract on the Dalian Commodity Exchange, for May delivery, was up 0.8 percent at 602 yuan ($90.07) a tonne by 0240 GMT, extending the previous session’s muted gains. Spot iron ore for delivery to China SH-CCN-IRNOR62, with 62 percent iron content, was steady at $85 a tonne on Wednesday, according to SteelHome consultancy.
“The weather is getting warmer so I think the steel demand in the construction sector will recover from next month, but not strongly,” said a trader at Rizhao Huaxin International Trade in Shandong province. While increased demand may provide some support to iron ore and steel prices, the trader said any gains may be muted as inventories remained “very high”. Steel demand has been slow in China since the latter part of 2018 as many construction projects have been halted amid the cold weather and with the world’s No. 2 economy losing some growth steam. But supply in the world’s top steel producer and consumer remained plentiful notwithstanding output curbs intended to fight pollution.
China, which produces half the world’s steel, had output of 928.3 million tonnes last year, while global output reached 1,808.6 million tonnes, according to data from the World Steel Association. In January, crude steel output from China rose to 75.0 million tonnes, up 4.3 percent from January 2018. The most-active construction steel rebar contract on the Shanghai Futures Exchange, for May delivery, edged down by 0.1 percent to 3,723 yuan a tonne in volatile trade. Hot rolled coil inched down 0.3 percent to 3,729 yuan. Hot-rolled coil, steel that is heat processed into metal sheets used for car bodies and household appliances, was a steady profit driver for mills but orders are now slowing down, two major steel mills and several traders told Reuters. Coking coal dropped 1.2 percent to 1,286 yuan a tonne, while coke slipped 1.0 percent to 2,113 yuan.