Dalian iron ore fell on Monday after a five-session rally, while prices of the steelmaking ingredient in Singapore retreated from a two-week high, as concerns about steel production curbs in top producer China re-emerged.
The most-traded January iron ore contract on China’s Dalian Commodity Exchange ended morning trade 1.8 percent lower at 711 yuan ($102.82) a ton.
On the Singapore Exchange, iron ore’s front-month September contract tumbled 3.4 percent to $102.40 a ton.
Authorities and mills in Tangshan, China’s biggest steel-producing city, met on Friday to discuss capacity reduction targets for the rest of 2022, according to several analysts.
China is expected to continue reducing annual output in line with its decarbonization goal. Its January-July crude steel output was down 6.4 percent at 609.28 million tons compared with the year-earlier volume, official data showed.
In Tangshan alone, a reduction of 8.3 million tons is required to meet the city’s target, which if implemented strictly would see its average daily output in August to December drop by 29,000 tons compared with July, according to Zhongzhou Futures analysts.
Under normal circumstances, China’s steel production curbs should support steel prices. But futures in Shanghai fell as sinking profits at China’s industrial firms amid fresh COVID-19 curbs and power shortages weighed on sentiment.
Worries about a potential global recession as central banks scramble to curb inflation through interest rate hikes also offset optimism about Beijing’s efforts to boost economic growth.
“The problem is that China’s dynamic clearing COVID strategy conflicts with its monetary and fiscal policy, as uncertainty over frequent lockdowns make the population disinclined or unable to spend,” said Navigate Commodities Managing Director AtillaWidnell.
Rebar on the Shanghai Futures Exchange dropped 2.2 percent, while hot-rolled coil shed 1.9 percent. Stainless steel was virtually flat.
Dalian coking coal fell 2.1 percent and coke slumped 3.3 percent.