Iron ore price sinks to 11-month low on covid recovery concerns

Benchmark 62% Fe fines imported into Northern China were changing hands for $130.26 a tonne, down 1.46% from Wednesday’s closing.

The high-grade Brazilian index (65% Fe fines) also fell 2.5% to $150.70 a tonne.

The iron ore price has dropped 40% from more than $220 in July, mainly due to lower imports by China following its move to control steel production to meet carbon emission norms.

The Chinese government asked 20 steel mills in Tangshan city to suspend operations for a week in August in order to reduce emissions as the Chinese steel sector makes up 15% of the country’s total carbon emissions.

Earlier this month, Baoshan Iron & Steel Co., the listed unit of China’s biggest producer, flagged the potential for renewed price declines in iron ore.

“We expect China’s steel curtailments to be targeted in 4Q when demand slows seasonally and air pollution is in focus (especially ahead of the Winter Olympics in Feb-22) and as a result we expect prices to stabilize in Sept/Oct before continuing to fall back below $100/tonne in 2022,” UBS analysts wrote in a recent note.

China’s factory activity slipped into contraction in August for the first time in nearly 1-1/2 years as covid-19 containment measures, supply bottlenecks and high raw material prices weighed on output in a blow to the economy.