Dalian iron ore futures extended losses on Tuesday as traders weighed the prospects of further government intervention in the market following the latest warning from China on speculative activity and ongoing production curbs in major steel cities.
The most-traded May iron ore futures contract on the Dalian Commodity Exchange (DCE) ended daytime trading 2.22%lower at 879 yuan ($127.80) a tonne, following a 2.48% drop the previous day.
“The main factors that weighed on (iron ore) prices are the environmental protection-induced production curbs among steel mills (in northern China) and uncertainties stemming from policy control in response to high prices,” analysts at Huatai Futures said in a note.
Northern China’s Handan and Tangshan cities, two major steel-making hubs, implemented level-2 emergency responses on March 17 and March 20, respectively, following a forecast of heavy air pollution in the coming days.
On the Singapore Exchange, the benchmark April iron ore recorded a fall of 0.6% to $124.75 a tonne, as of 0700 GMT, the lowest since March 6.
Other steel-making ingredients, such as coking coal and coke, also posted further losses with the former tumbling 3.05% and the latter falling 1.79%.
Steel prices continued their downtrend amid weakening raw materials prices. Rebar on the Shanghai Futures Exchange SRBcv1 fell 1.82% to 4,156 yuan a tonne, hot-rolled coil dropped 1.63%, wire rod shed 2.69% and stainless steel was listless.
“Construction steel production has picked up partly on the stimulus of improved steel margins and the corresponding destocking pace has also increased. And it’s worth observing the sustainability of steel consumption as well as the growing pace in the supply side (of steel products),” analysts at Huatai Futures added in the note.