China Steel Cuts Cool Iron Ore
Seaborne iron ore prices fell below $US60 a tonne on Wednesday as more production restrictions were reported from China's steelmaking hub of Tangshan in the northeast of the country.
The Metal Bulletin’s 62% Fe Iron Ore Index was $US59.65 a tonne delivered to northern China - a drop of $US136 a tonne, or 2.2% from Tuesday’s $US61.01 a tonne. That’s the lowest price since late June and the news will see the prices of BHP Billiton, Rio Tinto and Fortescue Metals come under pressure on the ASX today.
BHP shares rose 1.3% yesterday to $27.33, Rio shares fell 1.2% to $47.65 and Fortescue shares lost 1.6% to $4.97, the lowest close for those shares since late June.
Traders said the northeastern Chinese city of Tangshan (in Hebei province) ordered steel mills in eight districts and counties to halve their sintering activity and pellet production from 8pm onwards on Tuesday, due to forecast air pollution, Chinese media reported late on the same day.
The Tangshan government has asked local steelmakers to maintain the cuts until the end of this month to further improve air quality, according to a document circulated on the Internet late on Wednesday afternoon, the Metal Bulletin reported.
“The start of the off-peak production plan for the winter heating season has been brought forward from mid-November to mid-October, and mills need to adhere to the sintering and pellet-making limits until a detailed plan is issued, the document said.
“Most local mills have implemented the unexpected measures, and they still have enough sintered ore for short-term needs, sources told Metal Bulletin."
At the same time more Australian iron ore is arriving in China as Gina Rinehart’s Roy Hill mine has ramped up production towards its annual capacity of 55 million tonnes. It needs to run production at this level for three months to complete its development and financing.
The Chinese government has ordered heavily polluting industries that operate in the smog prone provinces of Hebei, Shanxi and Shandong (all near Beijing) to reduce output and curb emissions over the winter heating season, a period that runs from October to March.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.