Iron ore price falls as China steel body says output curbs underway

Iron ore fell as China’s top steel association confirmed that output curbs were underway, and long-awaited PBOC rate cuts failed to deliver a sustained lift in sentiment.

Futures fell as much as 2.3%, paring gains from Wednesday when the People’s Bank of China announced easing measures, including cutting the seven-day reverse repurchase rate. The turnaround came as the impact of tariffs and output cuts outweighed the government support measures.

The China Iron and Steel Association said this week the government was “actively deploying and promoting” its crude steel production mandate. Looming output restrictions have weighed on the market and are expected to impact demand of iron ore.

“The main task facing the steel industry is how to maintain a balance between supply and demand under limited market demand,” Wang Bin, director of CISA’s planning and development department, said at a recent press conference.

China announced in March it would push the steel industry to limit output in an attempt to ease a massive glut and restore profitability at mills. Annual production in the world’s biggest producer and consumer of the alloy has remained stubbornly above 1 billion tons. Exact details of the size or timeframe of the cuts have yet to be clarified.

Supply in the iron ore market is expected to ramp up toward the end of the year, with Guinea’s Simandou mine coming online.

Iron ore futures in Singapore fell 2% to $96.40 a ton at 3:15 p.m. local time. Yuan-priced futures on the Dalian exchange dropped 2%. Shanghai steel contracts also retreated.

(By Katharine Gemmell)