Chinese futures ended the week on slight gain with improvement in demand with the gradual return of workers to factories.
The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for May 2020 delivery closed at RMB 628.50 per tonne, up 0.96% day-on-day on Friday.
However, the rebar future suffered slight dip as the steel rebar contract for May 2020 delivery on the Shanghai Futures Exchange went down by 0.03% day-on-day to RMB 3,398 per tonne.
Rising steel inventory due to slow logistics
Despite the better paper market, the steel demand is expected to be under pressure in near term due to higher inventory among Chinese mills.
According to Mysteel, the steel inventory among Chinese mills continued to rise by 17.3% week-on-week to 11.5 million mt as of Thursday, 13 Feb 2020.
The high inventory was due to widescale transport disruptions aimed to curb the spread of coronavirus among Chinese cities.
Thus, the China Iron and Steel Association (CISA) had asked the Chinese government to ensure steel mills to receive adequate transportation to sustain their operations.
The disruption of transportation is estimated to recover in late February as some truck drivers were required to quarantine for 14 days before starting work again.
Last ditch buying for Carajas fines
This week saw a buying spree for Carajas fines among the iron ore buyers with a total iron ore products volume accounted 1.375 million mt for the week ended 14 Feb 2020.
Among the total volume, the sales of Carajas fines accounted 28% or 390,000 mt, being the most popular iron ore product among the mills. Then, it was followed by Brazilian Blend fines at 25% or 340,000 mt.
The snapping up for high Brazilian-origin fines might be due to Vale’s lower output for 63-68 tonnes of iron ore for Q4, down 5 million mt for previous estimate of 68-73 million mt.