Iron ore dropped below $100 a ton for the first time in over five weeks, showing signs that the crisis in China’s steel industry is worsening.
According to a report by Minmetals Futures, a broking firm, steel production in the key centre of Tangshan will fall by more than 8Mt in the second half due to plans to restrict output. The hub produced about 75Mt in the first six months.
Output in China’s vast steel sector is already running well behind last year’s pace as the industry reels from a property crisis that shows no signs of abating. Authorities in Tangshan, near Beijing, decided to cut production at a recent meeting. Major mill Angang Steel Co. has said it sees tough conditions persisting through the end of the year.
Iron ore has fallen over 7% as it heads for a fifth straight monthly drop. Stimulus measures announced by the government have yet to arrest the decline amid a slowing economy. Chinese banks are facing losses as mortgage boycotts sweep the property sector, which is crucial to steel demand, while economists turn more bearish on their growth forecasts for the country.
“A lack of growth in construction activity will keep steel demand weak in the short term.”Statement from analysts including Daniel Hynes at Australia & New Zealand Banking Group Ltd
“A lack of growth in construction activity will keep steel demand weak in the short term,” analysts including Daniel Hynes at Australia & New Zealand Banking Group Ltd. wrote in a note published in a report by Bloomberg UK.
Source: Bloomberg UK