China’s steelmaking raw materials extended their losses on Tuesday, with coke on a nine-day losing streak, even as steel was boosted by bargain-hunters and closures of bearish positions ahead of the quarter-end and Chinese holiday.
Iron ore for January delivery on the Dalian Exchange shed its morning gains to close down 0.32 percent at 464.50 yuan ($70.07) a tonne, its lowest close since July 14.
Very little has changed in the fundamental outlook for the market, said Richard Lu, a steel consultant at CRU in Beijing, but steel mills have started offering bargain prices, spurring some physical demand and supporting prices.
Some end-of-quarter window dressing had also helped support prices ahead of the week-long Chinese national holiday from Oct. 1. “In terms of the futures market, it’s more about a correction,” Lu said.
The most-traded construction steel futures contract on the Shanghai Futures Exchange closed up 0.87 percent at 3,614 yuan per tonne.
The coking coal and coke markets are still in bear territory, having declined 20 percent over the past month, after investors exited bullish long positions and placed new bearish bets amid concerns about falling demand over winter.
Tough restrictions on heavy manufacturing during winter in the north of the country are expected to curb demand for key steelmaking raw materials.
Dalian’s most-active coke futures contract, for delivery in January, ended down 0.62 percent at 1,995.50 yuan, its lowest close since July 31. The market last week notched up its biggest weekly loss since May.
The most-active coking coal futures contract closed down 1.36 percent on 1,161.50 yuan, extending losses from the previous session.
The slump came as industrial centres appear to be taking action ahead of the winter heating season due to a current bout of smog.
The key steelmaking hub of Tangshan said it would impose temporary restrictions on pelletizing and sintering production from Sep. 25 to tackle poor air quality in Hebei province.
The pellet and sinter plants can only run at 50 percent of their utilization rates, while the decoking time at all coke plants in the city will be extended beyond 36 hours.
“It is a temporary production restriction, but we may see more similar supply curtailments before the implementation of the (official winter) policy,” said He Ming, a steel analyst at Wood Mackenzie in Beijing.