Iron ore: price drops to 11-month low

The price of iron ore fell to an eleven-month low on Thursday amid concerns that the global economic recovery is slowing.

The price of iron ore fell 40 per cent from over $220 in July, mainly due to lower imports by China following its move to control steel production to meet carbon emission standards.

The Chinese government asked 20 steel mills in the city of Tangshan to suspend operations for a week in August to reduce emissions, as China’s steel sector accounts for 15% of the country’s total carbon emissions.

Earlier this month, Baoshan Iron & Steel Co, the listed unit of China’s largest producer, warned of the potential for a new drop in iron ore prices.

Chinese steel reductions are expected to be targeted in the fourth quarter, when demand slows seasonally and air pollution is at the forefront (especially ahead of the Winter Olympics in February 2022) and, as a result, prices are expected to stabilise in September/October before continuing to fall below $100/tonne in 2022.

Chinese factory activity slipped into contraction in August for the first time in almost 1.5 years, as covid-19 curbs, supply bottlenecks and high commodity prices weighed on production.