Dalian iron ore futures falter after steel output-cut urge

BEIJING: Benchmark iron ore futures in China fell nearly 6% on Wednesday, after the industry minister urged the steel industry to produce less crude steel next year amid the government's carbon neutrality scheme.

The Ministry of Industry and Information Technology called on the steel sector to "resolutely" cut crude steel output and ensure an annual drop in 2021.

China, the world's top steel producer, has been trying to cut its steel capacity but rarely asked producers to slash output.

It has shut 150 million tonnes of annual production capacity during the country's 13th five-year planning period over 2016-20.

"Output cut can further improve the steel sector's supply and demand situation... break and ease issues of deformed profits due to high raw material prices," CITIC Securities said in a note.

Reasonable control of steel production can safeguard profit margins of mills and prevent high prices from getting transferred to the downstream sectors, it added.

The most-traded iron ore futures on the Dalian Commodity Exchange, for May delivery, fell as much as 5.9%, the most since Dec. 23, to 959 yuan ($146.98) a tonne. It was down 4.9%, as of 0238 GMT.

Futures prices of other key steelmaking ingredients also declined in early trade.

Coking coal futures were down 2.8% to 1,649 yuan per tonne, after shedding 4.7% earlier in the session.

Dalian coke futures slipped 1% to 2,796 yuan a tonne.