Iron ore hits 2-week low as Chinese city curbs steel output

Asian benchmark iron ore futures fell more than 3% on Tuesday to their lowest levels in two weeks, as anti-pollution restrictions in China's top steelmaking city of Tangshan pressured prices.

Tangshan in the smog-prone northern Chinese province of Hebei, which accounts for a quarter of steel output in the world's top producer of the manufacturing and construction material, issues pollution alerts from time to time restricting mills' operations.

While physical steel prices in China have rebounded after last month's Lunar New Year holidays, boosting demand for key raw material iron ore, "operating restrictions in Tangshan placed downward pressure at least sentimentally for the time being," said Richard Lu, a senior analyst at CRU consultancy in Beijing.

The most-active May iron ore contract on the Dalian Commodity Exchange fell as much as 4% to 1,100 yuan ($168.43) a tonne, the weakest since Feb. 24.

Iron ore's front-month contract on the Singapore Exchange dropped as much as 3.2% to $162.10 a tonne, the lowest since Feb. 25.

Spot iron ore bound for China rose to $176 a tonne on Monday, from Friday's $175.50, according to SteelHome consultancy.

The benchmark 62% material traded at $179.50 last week, the highest level on record since 2012, based on SteelHome data available on the Refinitiv Eikon screen.

"The market is exhibiting strong volatility" as expectations of robust steel demand during the spring months of April and May clashed with concerns about reduced iron ore consumption due to operating restrictions in Tangshan, Lu said.

FUNDAMENTALS

• Construction steel rebar on the Shanghai Futures Exchange was down 0.5% by 0309 GMT, while hot-rolled coil edged up 0.3%.

• Stainless steel slumped 1.2%.

• Dalian coking coal dropped 1.4% and coke fell 2%.