Iron ore: 7% drop in China’s steel production data

The price of iron ore fell on Thursday after China reported a drop in the country’s steel production in August.

Mining stocks also fell, with BHP Group down more than 6% on the previous week, Rio Tinto Group down 5.3% and Vale down 7%.

China produced 83.24 million tonnes of crude steel in August, a 13.2% drop from the same period a year ago, according to data released by China’s National Bureau of Statistics on Wednesday, as the country curbed its steel industry to cut emissions.

With China’s plans to limit production to last year’s level, output is expected to fall 11% y-o-y in the second half of 2021, resulting in the loss of 87 million tonnes of iron ore demand.

Markets remain very sensitive to news of new restrictions as iron ore prices are still well above the cost of production.

Yunnan province in southwest China on Monday asked local producers to limit production of steel, aluminium and other materials. Some of the production planned for September would be postponed until the last two months of the year.

The province, which produces about 2.3 percent of the nation’s total crude steel, is the latest to be targeted as the country intensifies its “blue skies” campaign aimed at reducing air pollution for the Beijing Winter Olympics in February next year.