DCE opened low and finished high at the end of afternoon session on Wednesday but still closed below the RMB 600/mt level.
The most-traded January 2020 iron ore contract on the Dalian Commodity Exchange (DCE) finished RMB 588/mt on Wednesday, down 0.84% on-day, after reaching a day-high of RMB 591/mt and traded a day-low at RMB 571/mt.
Meanwhile, the rebar contract closed at RMB 3,611/mt, down 0.17% on-day after reaching a day-high of RMB 3,622/mt.
Full circle for iron ore prices
The physical iron ore prices seemed to come into a full circle, as Platts assessed the 62% Fe Iron Ore index at $83.10/mt CFR North China on Tuesday. The recent price was almost similar to the pre-disaster price level of $83-$87/mt recorded back in March 2019.
Weak steel margins were attributed for physical price decline which dampened buying interests of iron ore like the high grade ores, even though it is more economical to utilize them in steel production currently.
In the meantime, the barometer of steel demand or the Tangshan billet prices fell by RMB 30 to RMB 3,320 a tonne on Wednesday, prompting a bearish outlook on steel construction materials.
Therefore, the end-users expect more market volatility ahead and generally held back from large seaborne purchases.
Production cut to the rescue?
Some trade participants believed that the market is unlikely to improve, even with the upcoming production cut for steel mills in September.
Furthermore, there have been a lack of iron ore buying activities, probably due to the uncertainty over the output cut in September.
Although there had been a market consensus of a more relaxed production cut in September, but end-users are still more cautious in buying seaborne cargoes due to the bearish sentiments.