Iron spot prices eased back. Paper fell harder. Steel jumped higher. Reuters explains:
China’s top steel city of Tangshan has imposed a new set of output restrictions on its iron and steel firms because of persistently high industrial gas pollution levels, the local government-backed Tangshan Labour Daily reported on Monday.
Two units of steel giant Shougang, Hebei Wenfeng Iron and Steel, Tangsteel, Delong Holdings and Hebei Zongheng Steel must cut production at sintering plants, blast furnaces, converters and lime kilns by 20% until Aug. 1, the newspaper said.
Other steel companies will have to halve their production, it said.
Logically, cutting steel output should hit iron ore demand and prices but, so far in this cycle, it has worked in the opposite way, with higher steel prices driving raw materials higher as well.
The iron ore market is so overbought this time perhaps logic will prevail. It is another sign that underlying demand is beginning to struggle.