Iron ore futures opened high in the morning session, only to fall later at the afternoon session, due to steel output restriction in Tangshan.
The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE), then fell by 2.94% day-on-day or RMB 33.50 to RMB 1,107/mt on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange also dropped slightly by 0.70% or RMB 32 day on-day to RMB 4,552/mt.
Pollution alert issues in Tangshan
The decline was traced to the Chinese authority’s issuing of the second-level pollution alert in Tangshan that restricted steel output.
Under the pollution alert, the hot rolled and cold rolled producers will be shut down, while the steel and coking plants’ production will be restricted in Tangshan, the steelmaking hub of China.
The limited production had since resulted the price of construction rebar to dip 0.7% on-day to RMB 4,552/mt and stainless steel prices to drop 0.5% on-day to RMB 15,330/mt.
However, price of hot rolled coil managed to stay afloat, up slightly by 0.1% to RMB 4,799/mt, due to market optimism over recovery of manufactured goods this year.
Lower iron ore shipment from Pilbara in mid-February
Iron ore shipments went down lower from the producers in the Pilbara region, due to quarterly maintenance shutdown and lesser exports volume from miners.
The total shipment volume from miners like Rio Tinto, BHP, FMG and Roy Hill reached 16.36 million deadweight tonnes (dwt) of capacity for the week ended in Feb 20, down nearly 10% on-week.
This was the first week of lower iron ore shipment after the disruption of tropical low in early February, which iron ore shipments rebounded quickly for the week ended in Feb 13, with 18.3 million dwt.