Benchmark Dalian iron ore on Tuesday fell to its weakest in six sessions, pressured by slowing demand in the wake of more output restrictions on steel producers in China's top steelmaking city of Tangshan. The most-actively traded September iron ore on the Dalian Commodity Exchange ended down 1.7% at 880 yuan ($127.86) a tonne. It fell as much as 2.4% to 874 yuan in early trade.
Concerns about demand for the steelmaking input outweighed supply issues, with market participants shrugging off news that Vale SA's second-quarter iron ore production plunged nearly 34% from a year ago. The Brazilian miner reaffirmed its 2019 sales guidance. Vale, the world's top iron ore exporter, said on Monday that its second-quarter production shrank as many of its key dams remained shut or partially shut after a deadly dam burst in January.
"Investors mulled over the impact of further curbs on the Chinese steel industry," ANZ Research said in a note, citing the latest notice from Tangshan on steel output restrictions. Tangshan has stepped up anti-pollution measures beginning July 21 until July 31 as it seeks to meet its air quality targets, a city government-backed newspaper reported on Monday.
Steel mills with "A level of emission", the cleanest in a four-tier emission level system set by the city, and those located in costal regions, will have to curb their sintering operations by 20% over the period. Benchmark spot 62% iron ore for delivery to China, the world's largest steel producer and consumer, was down 1.6% at $120 a tonne on Monday, data from SteelHome consultancy showed.
Vale's second-quarter iron ore output was down 12% from the previous quarter to 64 million tonnes, more than 10 million tonnes lower than the market had assumed, according to ANZ. Iron ore's spot and futures prices hit their highest levels in more than five years earlier this month on concerns about supply as top producers in Australia and Brazil have lowered shipment and output guidance for 2019.
South Korean steelmaker POSCO, the world's fifth-biggest steelmaker, on Tuesday forecast a pick-up in China's steel demand in the second half of the year, supported by a boost to economic policy. But it said global steel demand growth is expected to slow due to economic uncertainties.
The most-active steel rebar contract on the Shanghai Futures Exchange fell 0.6% to 3,941 yuan a tonne, its weakest close since June 24.
Hot-rolled steel used in cars and home appliances edged down 0.4% to a one-week low of 3,866 yuan.
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