Chinese futures rose slightly on Tuesday as the Chinese participants returned from their Ching Ming holiday.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for May 2020 delivery increased by 0.09% day-on-day to RMB 569.50 per tonne on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange also hiked slightly by 0.09% to RMB 3,206 per tonne.
European high-grade products to arrive in Chinese market
More European high-grade products to arrive in China as the coronavirus pandemic forced the European steelmakers to cut production and thus reduced their consumptions for raw materials.
China seemed to be brighter spot for demand as the rest of the world were coping with the effect of coronavirus pandemic and thus were in lockdowns and reduced steel productions.
However, the diversion of raw materials to China from European market might create a supply glut situation and China’s steel recovery demand was still slow, while there was little improvement in steel margins.
European HRC margins to weaken in Q2
European hot rolled coil (HRC) steel margins are expected to weaken further in the second quarter of 2020, according to Platts’ estimate.
Platts expected a drop to EUR 231/mt or $249/mt of the Northwest European HRC steel to raw materials spread for Q2 from EUR 253/mt in Q1, due to higher raw material costs.
Downstream demand also took a hit due to coronavirus pandemic that caused blast furnaces across Europe to idle. As such, Germany’s pig iron output fell by 9% year on year in first two months of 2020, as compared to a drop of 3.5% recorded in Q1 2019.
However, seaborne iron ore prices were expected to drop in Q2, as the global seaborne iron ore supplies normally see improvement in Q2 with iron ore producing countries like Australia and Brazil getting out of cyclone and rainy seasons.