Iron ore futures were under pressure on Tuesday, with the Singapore benchmark retreating nearly 7% after a four-day rally and Dalian contracts erasing early gains, as investor focus shifted back to steel production controls in China.
The steelmaking raw material’s most-active November contract on the Singapore Exchange plunged 6.9% to $126.05 a tonne.
On China’s Dalian Commodity Exchange, the most-traded January contract slipped 0.8% to 764.50 yuan ($118.48) a tonne.
“China’s plans to have a flat steel production growth this year look possible, as output curbs have been accelerated by power shortfalls,” said ANZ senior commodity strategist Daniel Hynes.
Steel output in China, the world’s biggest producer of the construction and manufacturing material, will have to contract 10% in annual terms between September and December, to achieve its goal of keeping 2021 production at no more than last year’s volume and stay in line with its decarbonisation goals, Hynes said.
China’s crude steel output in January-August grew 5.3% from a year earlier, despite production controls intensifying beginning July.
Tighter steel output curbs could be expected in early 2022, with China likely to keep air quality as clean as possible for Winter Olympics in February, analysts said.
But while iron ore prices have drastically fallen from record peaks in May, the surge in costs of two other steelmaking inputs – coking coal and coke – continued as supply concerns have intensified.
Dalian coking coal jumped 7.1% to a fresh contract high, while coke advanced 5.8% to its strongest level since Sept. 10.
China wants its top coal-producing regions to boost output immediately amid high prices and power shortages, but the recent flooding in Shanxi province has led to mine closures and hampered shipments.
Construction steel rebar and hot-rolled coil on the Shanghai Futures Exchange both shed 3.4%, while stainless steel lost 2.2%.
Source: Brecorder
