Iron ore prices decline due to reduced steel production

Iron ore prices fell as investor attention shifted back to control of China's steel production.

According to Fastmarkets MB, a 62% iron benchmark ore imported into North China changed hands at $ 129 a tonne, down 4.6% from Monday's close.

“China's plans to increase flat products production this year look possible as production cuts accelerated due to power outages,” said Daniel Hines, senior commodities strategist at ANZ.

Steel production in China, the world's largest producer of building and manufacturing materials, is set to decline 10% year-on-year between September and December to meet its decarbonization targets, Hines said.

Steel production in China from January to August rose 5.3% from a year earlier, despite tightening control over production from early July.

“Steel production in parts of China, such as Tangshan, Jiangsu, Zhejiang and Anhui, is reported to rise in October after steel production cuts were exceeded in these regions in September,” wrote Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia.

Analysts believe tighter restrictions on steel production can be expected in early 2022, as China is likely to keep air quality as clean as possible for the Winter Olympics in February.