BEIJING: Dalian and Singapore iron ore futures extended losses on Monday amid concerns over near-term weaker demand, after steel production hub Tangshan was required on Saturday to shutter some capacity in response to heavy pollution.
One of China’s top steel producers, the northern city’s government said it would launch a level 2 emergency response from Sunday to deal with the forecast heavy air pollution this week.
Several mills planned to reduce their sintering capacity between 30% and 50% to meet the government requirements, consultancy Mysteel said in a report.
It was not clear how long the production restrictions would last. The city of Handan, also a key steel producer, implemented similar curbs from Sunday.
The most-traded May iron ore futures contract on the Dalian Commodity Exchange (DCE) traded 0.55% lower at 903.50 yuan ($129.80) a tonne as of 0152 GMT. On the Singapore Exchange, the benchmark March iron ore contract traded at $125.55 a tonne, down 0.95%.
“It’s mainly the production restrictions [in Tangshan and Handan]that drove futures prices down this morning,” said a Shanghai-based steel analyst who declined to be identified because they are not authorised to speak to media.
The production curbs come ahead of the March 5 opening of China’s annual parliament meeting, one of the most high profile events of the year when Beijing typically makes extra efforts to ensure clear skies.
Rising portside inventories are also adding to the headwinds on iron ore, said analysts from ANZ bank in a note. Total stockpiles rose 1.2% last week to the highest level since September, they added.
Despite the weakness in iron ore, coking coal and coke gained on expectations of reduced supply after coal mines stepped up safety checks following a serious accident last week. Meanwhile, an expected pick-up in downstream steel demand lent support to steel prices.
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