Iron ore futures rose on Tuesday after steel mills in Tangshan, a major production hub, were ordered to halt operations to improve air quality ahead of a major military parade, while lower shipments also lent support to prices.
The most-traded January iron ore contract on China’s Dalian Commodity Exchange (DCE) TIO1! was up 2.17% at 799.5 yuan ($111.26) a metric ton, as of 0319 GMT.
The benchmark September iron ore (SZZFU5) on the Singapore Exchange was trading 1.16% higher at $104.7 a ton.
Steel mills in Tangshan, China’s leading steel production hub, have been ordered to stop operations from August 25 to ensure clean air in northern China ahead of the September 3 military parade commemorating the end of World War Two.
This could remove excess steel from the market and help push steel prices higher, said analysts at ANZ, adding that this would ultimately support steel mill margins and iron ore demand.
The total volume of iron ore shipments from top producers Australia and Brazil fell 1.5% week-on-week, according to data from Chinese consultancy Mysteel.
Broadly, China’s producer price index (PPI) fell 3.6% year-on-year in July, more than expected due to extreme weather and global trade uncertainties. Despite Chinese policy measures to curb disorderly competition, some analysts remained cautious that the measures may have limited impact without demand-side stimulus or reforms.
This comes amid a prolonged housing downturn in China’s property sector, weighing on consumer spending and factory activity.
Other steelmaking ingredients on the DCE surged, with coking coal NYMEX:ACT1! and coke (DCJcv1) up 5.13% and 2.36%, respectively.
Recent coal mine overproduction inspections sparked concerns about production cuts, driving coking coal prices higher, said broker Hexun Futures.
Steel benchmarks on the Shanghai Futures Exchange gained ground. Rebar RBF1! increased 1.12%, hot-rolled coil EHR1! climbed 1.43%, wire rod (SWRcv1) rose 0.67% and stainless steel HRC1! edged up 0.53%.
Source: Reuters