Iron ore price retreats as China vows to cut steel output in 2022

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The iron ore price fell on Tuesday after a spokesperson for China’s state planner said the country would keep reducing steel output this year.

Adding to concerns over demand prospects for the key steelmaking raw material, China’s steel production hub Tangshan implemented another round of covid-19 lockdowns in four districts for at least three days from Tuesday, the local government said in a statement.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $149.55 a tonne during morning trading, down 2.27% compared to Monday’s closing.

Iron ore price

The most-traded September iron ore contract on China’s the Dalian Commodity Exchange ended daytime trade 3.3% lower at 887 yuan ($139.18) a tonne, after touching a two-week high of 942 yuan earlier in the session.

On the Singapore Exchange, the most-active May contract was down 2.3% at $151.35 a tonne.

China will reduce crude steel output this year, after slashing production in 2021 in line with its goal to control carbon emissions, said a spokeswoman for China’s state planner, the National Development and Reform Commission. 

Expectations for additional policy support for the world’s second-largest economy, which faces risks of a sharp slowdown due to the lockdowns and headwinds brought on by the Ukraine war, have pushed Dalian iron ore prices up by more than 30% this year.

However, the timing and extent of the anticipated additional stimulus measures remain uncertain. Chinese authorities are walking a tight rope as they try to stimulate growth without endangering price stability. 

“It remains to be seen how extensive the Chinese policy response will be,” J.P. Morgan economists wrote in a note.

“Slower Chinese growth is expected to linger into 3Q before rebounding, raising the risk of near-term spillovers to regional trading partners and commodity exporters,” they said.

(With files from Reuters)