Iron ore futures in China edged lower in early trade on Tuesday as demand eased in the wake of a move to restrict production in top steelmaking city of Tangshan, but losses were modest amid hopes that steel mills will soon replenish their stocks. Tangshan in Hebei province issued a second-level pollution alert on Friday, effective from April 20 to April 25, in response to a wave of smog expected to blanket the region.
Steel mills in the city were ordered to halt operations of sintering machines by at least 40 percent or even shut down, based on their emission levels. The most traded September 2019 iron ore contract on the Dalian Commodity Exchange inched down 1 percent to 626 yuan ($93.27) a tonne.
Spot iron ore, with 62 percent fines, for delivery to China, was 2.2 percent higher at $95 a tonne on Monday, according to SteelHome consultancy. The fresh steel output restrictions in Tangshan have triggered "some short-term, sentiment-driven price changes", said Richard Lu, analyst at CRU consultancy in Beijing.
"But at some point in the future, when steel mills run down inventories, they have to restock," he said. Lu expects some mills to replenish their iron ore inventories before the Labour Day holiday in China next week. Steel prices were also lower, with the benchmark construction-used rebar contract on the Shanghai Futures Exchange down as much as 0.5 percent at 3,764 yuan a tonne.
"There has been a slowdown in downstream steel consumption since last week," said Darren Toh of Singapore-based steel and iron ore data analytics company Tivlon Technologies. "This slowdown has prompted steel mills to go slow in their iron ore procurement."
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