Benchmark Dalian iron ore futures slumped more than 3% to their lowest in six weeks on Wednesday, after China’s top steelmaking city of Tangshan issued a second-level smog alert that requires mills to further limit operations.
The Dalian Commodity Exchange’s most-traded iron ore contract, with January 2020 expiry, ended down 3.2% at 617 yuan a tonne. Earlier in the session, the contract fell up to 3.5%, hitting its weakest level since Sept. 2.
The steelmaking raw material’s losses widened after China outlined its annual anti-pollution plan for the winter in a document released by the Ministry of Ecology and Environment.
Tangshan’s move means more drastic steel production restrictions, after the city ordered steelmakers last week to reduce sintering, pelletizing and blast furnace operations from Oct. 10 until Oct. 31, a Shanghai-based trader said.
The latest emergency measures by Tangshan to address worsening air pollution were scheduled to take effect on Tuesday, according to local government-backed media, which did not say when the alert would be lifted.
Of the 33 Tangshan steelmakers, 30 have already halved sintering, pelletizing, lime kiln and blast furnace operations since Oct. 10, according to Mysteel consultancy.
Concerns about demand prospects for steel products and raw materials have dragged down the Chinese iron ore benchmark by about 4% over the last three sessions.
Chinese steel demand is forecast to grow just 1% next year, compared with this year’s projected growth of 7.8%, according to the World Steel Association, which blamed the ongoing trade conflict between China and the United States.
“It is unlikely that the Chinese government will reintroduce substantial stimulus measures as it continues to hold a balance between containing the slowdown and pushing forward its economic restructuring agenda,” the Belgium-based group said on Monday.
Iron ore’s spot and futures prices have slumped more than 20% from July’s five-year peaks, also because of signs that global production has stabilized after a tailings dam disaster in Brazil early this year tightened supplies.
FUNDAMENTALS
* Global miner Rio Tinto said on Wednesday its third-quarter iron ore shipments rose 5% on a year-on-year basis, helped by higher demand from Chinese steelmakers.
* Brazilian miner Vale SA, China’s major source of high-grade iron ore, on Monday reported a 35.4% quarterly jump in output.
* China’s northern cities will be required to cut emissions of dangerous PM2.5 particles by an average of 4% this winter, lower than the 5.5% cut proposed in an earlier draft of the winter pollution plan.
* The most-traded construction steel rebar contract on the Shanghai Futures Exchange fell 1.4% to 3,291 yuan a tonne, its lowest close since Aug. 28.
* Hot-rolled steel coil, used in cars and home appliances, slipped 0.9% to 3,287 yuan a tonne, its weakest finish since April 2.
* “Adding to the gloom were expectations of the World Steel Association that growth in world demand would slow to only 0.2% in 2019,” ANZ Research said in a note.
* Coking coal dropped 1.3%, coke slid 0.8%, and stainless steel declined 0.3%.