Iron ore price falls on production curbs in China

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Iron ore prices extended losses on Monday on concerns over near-term weaker demand, after steel production hub Tangshan was required on Saturday to shutter some capacity in response to heavy pollution.

Tangshan’s government said it would launch a level 2 emergency response from Sunday to deal with the forecast of heavy air pollution this week.

Several mills planned to reduce their sintering capacity between 30% and 50% to meet government requirements, consultancy Mysteel said in a report.

It was not clear how long the production restrictions would last. The city of Handan, also a key steel producer, implemented similar curbs on Sunday.

Benchmark 62% Fe fines imported into Northern China fell 3.28%, to $122.50 per tonne.

The most-traded May iron ore futures contract on the Dalian Commodity Exchange (DCE) ended daytime trade 2.53% lower at 885.5 yuan ($127.14) a tonne.

“It’s mainly the production restrictions [in Tangshan and Handan] that drove futures prices down this morning,” said a Shanghai-based steel analyst, declining to be identified as they are not authorized to speak to media.

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The production curbs come ahead of the March 5 opening of China’s annual parliament meeting, one of the most high-profile events of the year when Beijing typically makes extra efforts to ensure clear skies.

Rising portside inventories are also adding to the headwinds on iron ore, said analysts from ANZ bank in a note. Total stockpiles rose 1.2% last week to the highest level since September, they added.

($1 = 6.9645 yuan)

(With files from Reuters)