(Bloomberg) – Environmental restrictions and greater supply worsen the scenario for iron ore and bring down prices in the futures market.
The contract dropped to less than $130 a tonne amid recent moves by China to limit steel volumes for the rest of the year. In the latest move, Handan city officials announced restrictions that run until the end of October, according to the government’s website. The rules, which include closing some furnaces, could reduce the city’s steelmaking capacity by 8.6%, estimates consulting firm Mysteel.
“Restrictions on steel production are likely to intensify, and mills are adopting a wait-and-see attitude, unwilling to buy,” said CITIC Futures analyst Zeng Ning. Exports from Australia have increased, he said, and foreign sales from Brazil reached a record for the month of August. Iron ore stocks at China’s ports rose for a third week to the highest level since April, according to Steelhome.
In addition to increasing supply, the China Iron & Steel Association plans to increase domestic iron ore volumes by at least 100m tonnes by 2025. Association vice president Luo Tiejun told an internal conference that the group seeks to improve the security of the internal offer, according to a statement on the group’s website.
Among steelmakers’ operating plans, Angang Steel will ensure that its annual output does not exceed 2020 levels and has a maintenance plan in place, Citigroup analysts said at an investor meeting organized by the bank. Last week, Angang and other steelmakers warned of falling iron ore prices. The company could not be contacted immediately for comment.
Iron ore futures fell 9.5% to $129.35 a ton in Singapore, after a weekly loss of more than 9%. In China, iron ore futures were down 8%, while steel prices advanced.
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