Texture from Reuters:
Benchmark Dalian iron ore futures slumped in morning trade on Wednesday, extending losses into a third session, after China’s top steelmaking city of Tangshan issued a second-level smog alert that requires mills to further limit operations.
…The losses widened further after China outlined its annual anti-pollution plan for winter in a document released by the Ministry of Ecology and Environment.
Tangshan’s move means more drastic steel production restrictions, after the city ordered steelmakers last week to reduce sintering, pelletising and blast furnace operations from Oct. 10 until Oct. 31, a Shanghai-based trader said.
The latest emergency measures by Tangshan to address worsening air pollution were scheduled to take effect on Tuesday, according to local government-backed media, which did not say when the alert would be lifted.
For the past few years this has resulted in steel and iron ore prices rising. It is not the problem, it is the excuse. The real issue is Chinese demand is waning, it’s going to get worse as realty slows, and authorities do not want to stimulate (at least, not yet) given other battles they are fighting with credit, the currency and the US on trade.
As iron ore supply recovers we are headed into a glut scenario.
To the charts:
If steel breaks then we are in free air for another shunt lower in the entire ferrous complex. Today that appears to be odds-on.
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