China’s Iron Ore Market Deviates as Steel City Announces Second Level Pollution Alert

A worker walks by rolled up steel sits in the ArcelorMittal Dofasco steel plant in Hamilton, Ontario, Canada, March 13, 2018 (Photo: REUTERS/Mark Blinch/File Photo)

China's iron ore market diverged as higher grade ores increased price and mid and lower qualities weaken. Tangshan, China's leader in steel production announced second level smog alerts last weekend causing complications on steel production as the year ends.

Metal Bulletin reported that the standard grade ores dropped to 0.1 percent to $66.51 a tonne. The drop added to the earlier session's 1.2 percent recorded fall. On the positive side, higher grade 65% Brazilian fines increased by 0.1 percent to $82.80 per tonne.

The demand for more efficient and higher cost ore increased despite the unstable Chinese steel production these coming days. The decrease in gains in Chinese steel reversed its record earlier this week.

Iron ore markets are sensitive to the changes in the Chinese steel industry profit margin these recent months. The ore market dropped significantly in early December following the negative average profit margins of that month.

The strength in the higher grades started after continues signs of a slow production of Chinese steel in the early days of December. Mysteel Consultancy reported that utilization rates at Chinese still factories dropped by 0.83 percent last week to around 65.88 percent. The drop suggests that production curbs implemented in November which aims to improve air quality in northern Chinese provinces this coming winter lead to a weaker production and a possible gain in profit margins in the coming period.

Usually, steel mills prefer more efficient ore in maximizing their yield during periods that require environmental restrictions. China's General Admission of Customs reported this weekend that Chinese iron ore imports are continuously declining in November. According to records, the total imports of the country dropped by 2.4 percent from October. The total import is around 86.25 million tonnes. And it dropped by 8.8 percent from the same month in 2017.

Currently, the country has imported 977.89 million tonnes of iron ore. It is lower than its import amounting to 991.26 million tonnes in the same period of last year.

Since possible markets are on recess for the week, China's top steel production city announced second level smog alerts. The announcement started the implementation of air pollution reduction measures. The mills are expected to temporarily close parts of their production by 30 to 60 percent. The shutdown is based on their emission level. other companies that include construction materials production, pharmaceutical, cement and mining industry are also tasked to implement emergency measures.

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