Benchmark iron ore futures head for weekly declines on demand worries
- He said there is now "greater long-term risk to Chinese iron ore demand given the government wants to cut steel capacity and move towards scrap-intensive electric arc furnace production".
Benchmark Asian iron ore futures were mixed on Friday, but on track for their second straight weekly declines, as moves in China to restrict steel mills' highly-pollutive operations and reduce overall production capacity weighed on sentiment.
The most-traded iron ore for May delivery on China's Dalian Commodity Exchange was up 0.9% at 1,071.50 yuan ($165.17) a tonne by 0330 GMT, after earlier rising to 1,098.50 yuan.
However, the benchmark contract has fallen 6% this week, heading for its second-worst weekly performance this year. The front-month April contract for the steelmaking ingredient on the Singapore Exchange dropped 1.9% to $161.55 a tonne and was poised to decline by more than 3% this week.
China's Ministry of Ecology and Environment has urged the country's top steelmaking city of Tangshan to crackdown on violators of air quality rules after it found four mills had failed to implement production curbs during days of heavy pollution.
The Tangshan government issued a second-level pollution alert on March 8, urging heavy industrial companies such as steelmakers and coking plants to cut production accordingly.
The move dampened the market's optimism about a post-Lunar New Year demand boost for iron ore in the world's top steel producer, sending prices 5.7% lower to $166 a tonne on the same day, based on SteelHome consultancy data.
"The market vomited $10/tonne in one day as financial investors misdiagnosed the impact of recent environmental restrictions on Tangshan steelmaking capacity," said Atilla Widnell, managing director at Navigate Commodities in Singapore.
He said there is now "greater long-term risk to Chinese iron ore demand given the government wants to cut steel capacity and move towards scrap-intensive electric arc furnace production".
Rebar on the Shanghai Futures Exchange rose 3%, while hot-rolled coil climbed 2.9%, as physical demand increased. Stainless steel gained 0.2%.
Dalian coking coal added 0.7% but coke slumped 1.6%.
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