China iron ore drops for 5th day on steel output curbs, lean demand

17 January 2018

Chinese iron ore futures fell for a fifth day running on Wednesday to 2-1/2-week lows, pressured by slow demand in the world’s biggest consuming nation amid ongoing curbs on steel production in a campaign against smog.

Lean steel demand over winter has also cut appetite for the raw material, helping bloat iron ore stockpiles at China’s ports to the biggest in at least 14 years.

The most-traded iron ore contract for May delivery on the Dalian Commodity Exchange was down 0.7 percent at 532.50 yuan ($83) a tonne by 0232 GMT. It fell as far as 525.50 yuan earlier, its weakest since Dec. 29.

“Mills in the northern part of China are still facing restrictions on production and steel demand is also slow in most parts of the region because most construction work has stopped during winter,” said a Shanghai-based iron ore trader.

Restrictions affecting 28 Chinese cities, in place since mid-November, will remain in place through mid-March as the country fights pollution caused by industrial plants.

Given freezing temperatures in the north, some mills there are moving some inventory to southern China where the weather is relatively warmer, the trader said.

“Those mills in northern China cannot find enough demand so they bring their products down south,” he said.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB slid 1.1 percent to $75.71 a tonne on Tuesday, the lowest since Jan. 3, according to Metal Bulletin.

Amid weak demand, inventory of imported iron ore at China’s ports reached 152.83 million tonnes on Jan. 12, data compiled by SteelHome consultancy showed. SH-TOT-IRONINV

That was the largest volume of stocks at the ports since 2004 when SteelHome began tracking the data. The stockpiles increased 30 percent last year.

Other steelmaking raw materials also dropped. Coking coal futures fell 2.6 percent to 1,274.50 yuan a tonne and coke slipped 0.7 percent to 1,962.50 yuan.

Rebar on the Shanghai Futures Exchange edged up 0.4 percent to 3,829 yuan per tonne.