A rise in iron ore prices has been marred by the advent of emergency restrictions on Chinese steel producers in Tangshan – one of the country’s primary steelmaking hubs.
The price of 62 per cent Australian iron ore fines at China’s Qingdao Port rose above $US100 ($139) per tonne on November 24 due to improving sentiment in the domestic steel market.
It marked the commodity’s first breach above $US100 per tonne since the beginning of the month. However, a notice from the Tangshan city government has brought steel mills back to earth.
“A city government notice which began circulating from Wednesday morning said that the government was adopting the second-highest level of emergency measures – the ‘orange’ alert level,” Mysteel stated.
According to Mysteel, the emergency restrictions have been put in place to combat a sudden rise in atmospheric pollution over Tangshan, which it suggested could reach “extreme” levels.
“The new measures took effect from Wednesday afternoon (November 24) and were announced just days after the mills and other industrial enterprises had emerged from the last round of curbs just last Sunday,” Mysteel stated.
The Chinese Government had sought to restrict crude steel production in 2021 to within 2020’s record levels of 1.064 billion tonnes, improving air quality and environmental credentials.
According to the World Steel Association (WSA), China had produced about 875.5 million tonnes of crude steel by the end of October this year, allowing space for a further 190 million tonnes in November and December.
Considering the final two unrestricted months of 2020 produced 179 million tonnes, steel mills expected to resume normal proceedings to finish 2021, causing the bump in iron ore demand and prices subsequent to that.
China hasn’t increased its monthly steel production since a 2021-high of 99.5 million tonnes in May, according to the WSA.
Worldwide steel production increased marginally in October to 145.7 million tonnes – the first global increase seen since May.