Chinese iron ore futures slid to their weakest level in more than three months on Thursday, underlining investor worries over demand ahead of steel production cuts during the winter as China battles smog.
Spot iron ore prices have fallen along with futures, with the benchmark spot price slipping below $60 a tonne this week for the first time since June.
The most-active iron ore contract for January delivery on the Dalian Commodity Exchange fell to 427.50 yuan ($65) a tonne, its weakest since June 27. It was trading at 430 yuan by 0207 GMT, down 2.3 percent.
Steel plants in China’s northern cities, including in top steelmaking province Hebei, are scheduled to slash output by up to half for four months from mid-November as part of Beijing’s campaign against air pollution.
The impending steel output cuts “have dented the iron ore demand outlook,” said Commonwealth Bank of Australia analyst Vivek Dhar.
Around 30-35 million tonnes of Chinese crude steel production could be taken offline, which translates to 42-49 million tonnes of iron ore consumption, Dhar said in a note. That is equivalent to about 3 percent of the global seaborne iron ore market, he said.
“We forecast iron ore prices will average $60 in the fourth quarter, but given how volatile iron ore prices have been this year, we could see iron ore prices comfortably undershoot our expectations,” said Dhar.
Spot iron ore prices have already fallen below $60 a tonne on Wednesday. Iron ore for delivery to China’s Qingdao port dropped 2.2 percent to $59.65 a tonne, the lowest since June 23, according to Metal Bulletin.
The spot benchmark has fallen more than 25 percent from a 4-1/2-month peak reached in August.
Also on Thursday, the most-traded rebar on the Shanghai Futures Exchange eased 0.5 percent to 3,550 yuan a tonne.
Source: ReutersPrevious Next