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Iron ore price plunges on China’s move to cut steel production

Construction workers in Beijing. Image by Loic.Hofstedt via Flickr.

The Chinese iron ore price fell for a fourth consecutive session, down more than 7% to its lowest level in nearly three weeks on prospects of more imports of the steelmaking ingredient and as demand eased on the government’s decision to cut production.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $202.63 a tonne on Thursday, down 5.6% from Wednesday’s closing.

The most-traded iron ore futures on the Dalian Commodity Exchange, for September delivery, plunged as much as 7.3% to 1,115 yuan ($172.51) per tonne, the lowest since July 2. They closed 5.3% lower at 1,138 yuan per tonne.

Some steel producers in China’s Jiangsu, Fujian and Yunnan provinces were told by the government to cut production as the country aims to keep its annual output no higher than it was in 2020.

“The government has a relatively strong determination to control steel output this year, which could affect demand for raw materials,” said Li Wentao, an analyst with Tianfeng Futures.

Meanwhile, China’s imports of iron ore are expected to increase this month, leaving possibilities for an oversupply, Li added.

(With files from Reuters)