Iron ore price hits one year low on China demand collapse

Shanghai Financial Center (Stock Image)

The iron ore price sank to one year low on Friday on fears of more steel production curbs in China.

The most-traded January iron ore contract on the Dalian Commodity Exchange ended daytime trading 0.3% lower at 732.50 yuan ($113.66) a tonne. It touched 717.50 yuan a tonne on Thursday, the weakest since February 4.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $129.71 a tonne, down 0.4% from Thursday’s closing.

“Iron ore prices have had a volatile couple of months but as August closed, it was clear there had been a quantum shift in the market leading us to revise down our year–end forecast from $175/tonne to $125/tonne,” said Westpac senior economist Justin Smirk.

China has vowed to limit crude steel output this year at no higher than its 2020 production to curb industrial pollution. But news of possible further restrictions rattled the market.

In Jiangsu, China’s second-largest steel-producing province, a campaign to monitor energy consumption among industrial enterprises including steelmakers raised fears of further disruption in blast furnace operations, Mysteel consultancy reported.

China’s factory activity slipped into contraction in August for the first time in nearly 1-1/2 years as covid-19 containment measures, supply bottlenecks and high raw material prices weighed on output in a blow to the economy.

Related read: Vale’s red-tape headache Is boon for sagging iron ore market

(With files from Reuters)

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