Dalian iron ore set for worst week in 2 months as China flags further curbs

Asia's iron ore benchmarks fell for a third straight session on Friday, on course for a second consecutive weekly drop, as top steel producer China stepped up efforts to cool a blistering demand-driven rally in raw material prices.

The most-traded iron ore for September delivery on China's Dalian Commodity Exchange ended the morning trade 1% lower at 1,123.50 yuan ($174.63) a tonne.

It has fallen 5.3% so far this week, the steepest since mid-March.

The most-liquid June iron ore on the Singapore Exchange dropped 3.2% to $194.60 a tonne.

Steel prices in China have pulled back from last week's record highs, dragging iron ore and other steelmaking ingredients lower, with the sell-off intensifying after China's cabinet on Wednesday sought to curb "unreasonable" price gains to protect consumers.

Analysts, however, say unless China takes steps to curb the consumption of industrial commodities, which could hamper its solid recovery from a pandemic-driven slump, the price impact of recent measures and pronouncements will only be temporary.

"Have these (Chinese government agencies) achieved any fundamental or structural industry changes aside from creating unnecessary speculation and market volatility?" asked Atilla Widnell, managing director at Singapore-based Navigate Commodities.

"The answer is no. Allowing the invisible hand to go about its business would have been the correct strategy."

Despite the selling pressure on iron ore, prices especially of high-grade materials remain elevated, giving steel producers some headache including those outside China.

Prices are expected to remain high in the long term as China's stricter environmental regulations have prompted a shift to top-grade and less-polluting materials, said Kohji Takei, a manager at the raw materials division at Nippon Steel, Japan's biggest steelmaker.

Construction steel rebar on the Shanghai Futures Exchange rose 0.3% after two days of falls, while hot-rolled coil gained 1%. Stainless steel advanced 0.7%.

Dalian coking coal shed 4%, while coke dropped 2.2%.