Iron ore resumed plunging on Monday amid weak import data, indicating that production cuts in China are affecting demand.
Australian iron ore fines 62% fell by $7.5/t to $163.25/t CFR, the lowest since late March, following an RMB 42.5/t ($6.6/t) decrease in January contracts on the DCE. The lasting demand weakness was still keeping the raw material tags under pressure.
During the weekend, official data revealed that import of the steelmaking ingredient to China continued to soften for the fourth month in a row in July, dropping by 1% m-o-m and by huge 21.4% y-o-y to 88.51 million t.
The plunge was caused by massive output restrictions imposed in a number of China’s provinces last month, impacting the iron ore demand and market sentiment. “Steel mills in the Shanxi region have been ordered to cut production by 50% so as to cap steel production below last year’s record high with officials pledging to aggressively enforce restrictions,” said Westpac analysts quoted by the Australian press.
Besides, most of sintering equipment is still being stopped in Tangshan city in a bid to improve air quality. Additional pressure comes from the increasing number of COVID-19 infection cases in China, which hampers construction activity and, accordingly, steel and iron ore consumption. “The virus spread may bring down the traditional recovery of business activity in late August,” a market source told.