DCE receives a boost from high Chinese output

Chinese futures rose slightly on Wednesday, receiving a little boost from the return of Chinese participants from holidays. The most-actively traded iron ore futures on the Dalian Commodity Exchange (DCE), for May 2020 delivery rose by 0.58% day-on-day to RMB 610.50 per tonne on Wednesday. Following the rally, the steel rebar contract on the Shanghai Futures Exchange also hiked slightly by 0.09% to RMB 3,206 per tonne.   No cut in Chinese steel output The rising futures reflected market sentiments of more Chinese steel production ahead with little interruptions such as stringent output cut based on environmental policy. As China was among the first countries to relax quarantine rules that allowed the resumption of its industrial and economy much earlier than other coronavirus-affected countries. Thus, Mysteel recorded a rise of 81.68% for the country’s weekly capacity utilisation rates of blast furnaces among 247 Chinese mills, as of April 30.   Surplus supply to pull prices down at $70/mt Despite higher Chinese demand, Citigroup expects iron ore prices to lower to $70/mt in May, in view of shrinking global steel demand. This was due to the bank’s estimation of a surplus of more than 80 million tonnes of iron ore in the second half of the year as miners recovered most of their production from bad weathers. Moreover, the investment bank noted that steel demand outside of Asia had been grim, with prediction of ex-Asia steel demand to fall 30% year-on-year at Q2 2020, then dropped by 25% year-on-year in Q3 2020, before rising to a slight gain of 4% year-on-year for the last quarter in 2020.