According to Reuters, on Monday, March 11, raw materials for steel production in China fell: the basic contract for iron ore reached its minimum this month, coke continued its losses for the fifth session, as demand declined amid restrictions on steel production.
The fall in futures reflects the mirror weakness that has prevailed in the physical market since last week, as steel mills reduced output in line with smog control measures.
“The situation with air pollution in many areas of China is not very good. I believe that there will be another round of restrictions on production for the metallurgical industry, ”said a trader from Shanghai.
The best-selling iron ore contract on the Dalian Mercantile Exchange, with the expiration in May, fell 3.6% to 594.5 yuan ($ 88.42) per tonne, the lowest level since February 27, and by the end of trading was 598 yuan .
Other raw materials for steel production also fell: coke in Dalian fell 3.8% to 1965 yuan, and then fell to 1966.5 yuan. Coking coal fell 2.3% to 1226 yuan.
The leading Chinese steel city of Tangshan indefinitely extended the highest level of smog warning set on March 1, forcing mills to reduce production by 40-70% or even stop production. Wu'an, another city in Hebei Province, extended production cuts until March 10th.
The most active steel rebar contract on the Shanghai Futures Exchange, also expiring in May, fell 1.6% to 3,723 yuan per ton. Hot roll decreased by 0.6% to 3692 yuan.
As demand for iron ore remained weak during February, shipments to Chinese ports continued to grow, reaching over 147 million tons as of March 11, the highest level since September, according to data compiled by SteelHome consulting company.
“We continue to increase forward shipments along with an increase in iron ore supplies to China,” said Hui Heng Tan, an analyst at Marex Spectron.
“In general, replenishment efforts are small, as various cuts in production in China continue to reduce interest, and factories continue to reduce their materials,” Tan said.