Iron ore price back above $200 on hopes of output curb easing in China

Iron ore stockpile (Credit: Rio Tinto)

Iron ore price jumped on Tuesday, boosted by reports that steel hub Tangshan plans to ease requirements for production cuts at its mills.

The Tangshan government held a symposium on Monday, mulling to lower output curtailment ratio for some mills that had finished ultra-low emission upgrades, according to state-backed Securities Times, citing media reports.

Last month, officials in Tangshan warned its steel mills to maintain market order and safeguard companies’ normal operations.

The local government there said it would look into illegal behaviour including market manipulation and hoarding, and would punish and suspend businesses found guilty.

But an industry source told Reuters the plan is still under discussion and has not been officially approved yet.

Capital Economics’ latest report predicted iron ore prices could drop back to around $140 per tonne by end-2021, and $120 per tonne by end-2022.

However, Tuesday morning Benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were up 5%, changing hands for $208.67 a tonne, according to Fastmarkets MB.

The most-traded iron ore futures on the Dalian Commodity Exchange, for September delivery, surged 7.3% to 1,170 yuan ($183.53) a tonne.

Citi Research analysts said in a note the move by Tangshan could put some pressure on steel prices in the near run as the market heads into the weak season.

“However, we still expect more production measures in other provinces in 2H in order to reduce carbon emissions.”

China’s environment ministry said it would tighten approvals for energy-intensive and polluting projects such as steel, aluminium and coking coal.

(With files from Reuters)