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Iron ore price plunges on falling steel output

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Iron ore prices fell on Wednesday as steel output in China continued to slide.

China’s monthly crude steel production slipped for the third straight month to 83.24 million tonnes in August, data from the National Bureau of Statistics showed, sending average daily output to the lowest since March 2020.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $116.65 a tonne, down 4.1% from Tuesday’s closing.

The most-traded iron ore futures on the Dalian Commodity Exchange, for January delivery, fell as much as 4.3% to 683 yuan ($106.02) per tonne, the lowest since Dec. 9, 2020.

Stainless steel futures on the bourse, however, jumped 4.5% to 19,815 yuan a tonne.

“Global commodity prices are still at high levels, and there’s still uncertainty in future trends despite recent drops,” a spokesperson from the statistics bureau said at a briefing on Wednesday.

The country’s property investment in August rose 0.3% from a year ago, the slowest pace in 18 months, while the fixed-asset investment grew 8.9% on an annual basis in the first eight months of the year, according to the statistics bureau.

China’s southwest Yunnan province asked local producers on Monday to restrict output on steel, aluminum and other materials. Part of the planned production in September would be postponed to the last two months of the year.

The province, which produces about 2.3% of the nation’s total crude steel, is the latest to be targeted as the country steps up its blue skies campaign aimed at reducing air pollution for the Beijing Winter Olympic Games in February.

“We’ve been here before with China trying to ensure blue skies leading into the 2008 Beijing Summer Olympics where we saw iron ore prices pull back quite a lot,” senior economist at Westpac, Justin Smirk, told the Financial Review.

“Markets remain highly sensitive to news of new curbs because iron ore prices are still well above the cost of production.”

(With files from Reuters)

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