China's demand for iron ore in November will fall by 6 million tons

Iron ore demand in China is forecast to decline by 6 million tonnes in November as the world's largest consumer of raw materials plans to curb steel production in the winter to meet air pollution targets.

Steel production cuts in 28 Chinese cities are set to begin Nov.15 and may include other cities, suggesting that demand for iron ore could fall more than expected, the China Iron and Steel Association (CISA ).

The Chinese government has ordered production barriers to be consistent with pollution targets to reduce the smog that typically occurs in northern China during the November to March winter season. Several cities, including the leading steel producing cities Tangshan and Handan, began cutting back a month ahead of schedule.

“Taking into account the seasonal factor, demand for iron ore in November will decrease by 6 million tons, which is 4.5 million tons more than in October,” the CISA said. Chinese iron ore demand typically slows in November and December as steel mills schedule maintenance while construction demand falls in colder weather.

The CISA warned that iron ore prices could be hit harder if steel mills and traders dumped their stocks of raw materials. The stable price is likely to rise after the Lunar New Year holiday, when demand starts to rebound, given that inventories are low, CISA said.