Iron Ore Prices Rise as China Plans Steel Output Cuts for Military Parade
Iron ore prices went up for the second day in a row, as traders expect China to cut steel production next month to reduce pollution during a big military parade in Beijing.
In Singapore iron ore futures traded around $105 per ton, based on an 1.4 percent increase over the previous day. Reports say steel mills in northern China have been told to slow production so the skies are clear for the September 3 event. Some coking coal factories have also been told to stop operations, according to Shanghai Steelhome E-Commerce.
The parade commemorates the 80th anniversary of the end of World War II and will be the venue for Russian President Vladimir Putin. China usually shuts down heavy-polluting industries during major events — during the last big parade 10 years ago, nearly 4,000 companies near Beijing stopped work.
China’s steel industry is very sensitive to government restrictions because of the ongoing push to cut overcapacity. Short-term production cuts often lead to higher steel prices and profit margins, which in turn push up the cost of raw materials like iron ore and coking coal.
Some mills are already stockpiling materials ahead of the cuts to avoid shortages later, said analyst Pan Da from Henan Zhonggangwang Technology Group. However, he warned that high stock levels could cause prices to drop again if demand weakens.
By 2:43 p.m. in Singapore, iron ore futures were up 1% to $104.55 a ton. Other metals also rose — copper gained 0.5% to $9,777 a ton in London, while aluminum and zinc prices increased as well.
— Reporting by Naqsh News and other Agencies
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