China iron ore price sees worst week in 17 months on steel curbs
Dalian iron ore was set on Friday for its steepest weekly drop in 17 months, as China’s intensified drive to lower steel output prompts mills to start cutting production to avoid sanctions.
The most active September contract on China’s Dalian Commodity Exchange has fallen roughly 10% from last week, its biggest weekly drop since February 2020, and is now off 17% from a record peak touched in May.
Iron ore’s most-traded August contract on the Singapore Exchange dipped 0.2% to $197.25 a tonne.
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $201.33 a tonne on Friday, down 0.5% from Thursday’s closing.
China has stepped up efforts to reduce the output of the construction and manufacturing material in line with its carbon emission reduction goal.
Authorities have asked steel mills to ensure their output this year will be no more than 2020 volumes after the first-half production rose roughly 12% from the same period last year.
In China’s top steelmaking city of Tangshan, “authorities have vowed to punish violations of production restrictions”, ANZ commodity strategists said in a note.
“Some independent rolled steel firms halted production in early July, with more closures expected in coming months,” they said.
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Benchmark 62%-grade iron ore’s spot price in China hit a six-week low of $209.50 a tonne on Thursday, SteelHome consultancy data showed.
Global production
Global steel production gained 11.6% year-on-year in June, and crude steel output rose to 167.9 million tonnes during the month, World Steel Association data showed on Friday
Compared to the previous month, average daily steel production worldwide fell by 0.5% in June, while Chinese production declined by 2.5%, Kieran Clancy, assistant commodities economist at Capital Economics said in a note.
“Government-imposed environmental controls in China weighed heavily on steel production there, and renewed efforts to clamp down on excess steelmaking capacity in recent weeks suggest it will fall further in the months ahead,” Clancy said.
Enterprises accounting for 61% of China’s steel output have completed or are implementing ultra-low emission reforms, an industry group said earlier this month.
Outside China, however, steel production was stronger in June, probably because of robust regional steel prices, Clancy added.
Year on year, Indian steel output surged by 21%, while production in both Japan and the United States jumped by 44%, data showed.
