Arab Steel Summit
SMS group
Arab Steel Summit

Report: Iron ore prices drop amid China’s restrictions on steel production

Iron ore futures, the most traded on the Dalian Commodity Exchange for March 17-24, 2023, fell by 6.4% from the previous week – to 866.5 Yuan/t ($126.43/t). It is the second consecutive decline after reaching its highest level in 8 months.

On the Singapore Exchange, April futures contracts, as of March 24, 2023, decreased by 8.1% compared to March 17, 2023, to $119.9 per tonne.

Iron ore prices fell in China after the country’s government announced that it intends to take measures to curb the sharp rise in iron ore prices to remove speculation in the market.

China’s National Development and Reform Commission’s Price Monitoring Center surveyed the country’s ports last week to assess stocks of raw materials and determine the need for special measures to control commodity prices. The agency warned traders against hoarding and overpriced.

Despite this, iron ore prices continued to rise. However, the trend reversed after the Chinese government announced restrictions on steel production in the country’s major industrial cities amid high levels of air pollution.

Some factories in Tangshan have reduced capacity utilization by 30-50%, while most factories have enough iron ore reserves to maintain regular production for the next week.

In addition, at a meeting of China’s political leadership last week, it was proposed to cut steel production by 2.5% in 2023, which also hurt the market, although such a decision has not been finalized yet.

China’s iron ore market rebounded somewhat at the end of the week as restrictions on steel production were lifted in the country’s major cities amid improved air quality, and factories operated at reduced capacity for only three days – from March 17 to 20.

Steel manufacturers are struggling to maintain relatively low stocks of raw materials in warehouses as the market for raw materials is volatile, and companies’ margins have fallen after the sharp decline in steel prices.

In addition, the increase in the supply of scrap metal is putting pressure on iron ore.

Weak recovery in steel prices, volatility in plant margins and an expected increase in steel supply are envisioned to continue to influence the iron ore market in the short term.

Meanwhile, according to Shanghai analysts, the decline in raw material prices reached the lowest level last week.

According to the previous report, it was indicated the iron ore market in China would face an oversupply in 2023 with an increase in the total supply of iron ore, and demand from steel producers is likely to decrease.

China’s domestic supply of ferrous metals, including production in domestic mines and imports, is expected to grow by 23 million tonnes annually in 2023 to reach 1.41 billion tonnes, with total demand expected to reach a level of 1.39 billion tonnes in the current year, which is less than by 3.6 million tonnes for the year 2022.


Related News


Latest News