DCE recovers from early dip

Dalian Commodities Exchange (DCE) rose on second consecutive day to reverse a dip from early trading session on Tuesday.

By the end of the afternoon session, the most active iron ore contract for January delivery inched up by 0.63% on-day to RMB 636.50 per tonne, while the most-active rebar contract on the Shanghai Futures Exchange, for January 2020 delivery also increased by 2.31% on-day to RMB 3,635 per tonne.

 

No clear winter output cut yet

The slight rise may be due to market uncertainty over the output restriction on steel industry in China.

According to Mysteel, the city authority of Tangshan had issued environmental orange level two alert in a bid to improve air quality in the region.  

However, the latest policy did not specify on production restriction on steel mills but rather it placed restriction on the truck transportation such as time of operations and type of trucks being used for distributions.

 

Strong downstream demand

The paper market rally followed the bullish downstream demand of China’s construction sectors, especially from the strong rebar paper market seen on Tuesday.

According to trade sources, China’s steel inventories had fallen to almost 10 months low level since January this year. This shortfall prompted some end-users to restock eagerly, which lent support to steel prices with good margins from steel manufacturing.

However, some trade participants are expecting a stricter winter output cut ahead due to the forecast of unfavorable weather that brings more smog to northern China.