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Market Fears Iron Ore Demand Shock amid Rumours That Tangshn Will Begin to Cap Crude Steel Production from June

The most-traded DCE 2309 iron ore contract moved in a wide range today, closing down 2.95% at 707 yuan/mt. Traders were less willing to sell, while steel mills mostly restocked as needed. Overall transactions were modest. The transaction prices of PB fines in Shandong fell 5-10 yuan/mt to 770-775 yuan/mt; PB fines in Tangshan lost 5-15 yuan/mt to 800 yuan/mt; super special fines in Tangshan dipped 5 yuan/mt to 655 yuan/mt.

Earlier, Tangshan has set goal to cap annual crude steel production, which is not allowed to be higher than the previous year. Recently, there are rumours thatTangshan will implement this poliy starting from June, triggering market concerns about future iron ore demand. This, coupled with the recent increase in iron ore supply, sent iron ore futures prices down sharply. However, traders expect steel mills to restock due to low inventory, thus spot iron ore prices were supported. In view of off-season in end-user market and poor profits of steel mills, imported iron ore prices may still face downward pressure.
Source: SMM

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