Iron ore prices fell on Thursday, pressured by the prospects of a demand slowdown for the steelmaking ingredient in China.
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $196.06 a tonne, down 3.2% from Wednesday’s closing.
The most-traded iron ore contract for September delivery on China’s Dalian Commodity Exchange closed daytime trading 1.6% lower at 1,114.50 yuan ($172.37), extending losses into a third straight session.
In September 2020, President Xi Jinping formally announced that China will aim to achieve a peak in carbon emissions before 2030, followed by carbon neutrality before 2060. As part of the decarbonization efforts, the Chinese government at the start of the year announced its intention to start reducing steel production in 2021.
However, China’s crude steel output in the first half grew nearly 12% compared with a year earlier.
“We think it is reasonable to expect second-half steel production growth in China will slow down meaningfully from the first half,” JPMorgan analysts said in a note.
JPMorgan expects Chinese demand to recover strongly in the fourth quarter, leading to a strong rebound in both steel prices and margins.
“After record-strong steel production in 2021 H1, we are starting to see China’s steel output decline. Margins have been falling, especially for steel producers supplying the construction industry, and we are getting more clarity of how the government’s announced production cuts will be rolled out and affect various provinces and steel mills in the second half of the year, said CRU’s steel analyst Richard Lu in a note.
