Ore loses ground as steel production cuts in China

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Krystal Chia, gives Bloomberg

the futures of iron ore increased losses, dropping to 6.4% in Singapore, amid the slowdown in steel operations in China, which shrinks the demand for the raw material.

The steel industry’s main input fell for the third day in a row as the Chinese government’s efforts to save electricity and cut emissions from the highly polluting sector, resulting in weaker demand. The iron ore drop in recent days comes on the heels of an almost 14% rise last week on optimism that China’s construction sector season in the fourth quarter would boost consumption.

Recent measures to limit steel production in Guangxi province are being implemented, and environmental inspections in Guangxi province. Sichuan also led some mills to stop operations, said Wang Haitao, an analyst at Huatai Futures. Iron ore prices could fall further, he said.

Guangxi, a major steelmaking province, ordered local mills to cut output by 30% this month, consultancy Mysteel said, without citing how it got the information. In addition, China’s Hebei province approved 13 iron ore projects in August, according to disclosed by Mysteel on Tuesday.

New projects may increase the supply in cash, and investors should be aware of trading controls by the stock market, analysts at Ruida Futures said in a report on Wednesday.

In another sign of slowing growth in China, manufacturing activity shrank for the first time since April 2020 under the impact of new outbreaks of covid-19, which halted production, according to a private indicator. The fall in the manufacturing purchasing managers index measured by Caixin was worse than official industry data.

In Singapore, iron ore futures were down 5.9% to $143.25 a ton at 1:38 pm local time. Chinese iron ore prices lost nearly 5%, while steel futures also retreated.

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