Chinese iron ore futures dropped as much as 2.1% in early trade on Tuesday, after top steel-producing city Tangshan issued a second-level pollution alert forcing mills to curb production.
Output at steel mills and coking plants in Tangshan will be limited from Feb. 23 in response to expected heavy pollution, while production at hot rolled and cold rolled producers will be suspended, the local government said in a statement.
The most-traded iron ore futures on the Dalian Commodity Exchange for May delivery declined as much as 2.1% to 1,117 yuan ($172.95) a tonne. They were down 1.5% as of 0330 GMT.
Prices of other steelmaking ingredients also fell, with coking coal plunging 3.5% to 1,475 yuan a tonne and coke down 2.4% at 2,599 yuan a tonne.
Steel prices on the Shanghai Futures Exchange were mixed.
Construction rebar dipped 0.2% to 4,576 yuan a tonne.
Hot rolled coil, used in cars and home appliances, rose 0.5% to 4,818 yuan per tonne.
"We see both domestic and international demand for Chinese manufactured goods recover this year," Fitch Solutions wrote in a note, referring to a global economic bounce-back from the pandemic as countries worldwide roll-out COVID-19 vaccines.
"The strong pick-up in steel demand in 2021 amidst a robust and broad economic recovery will impede prices from crashing and will help them average at elevated levels this year," according to Fitch Solutions.
