Steel and iron ore futures prices plummeted to their lowest levels since February 2020, as demand dwindled and prices plunged.
BHP, Rio Tinto, and Fortescue Metals and the state and federal budgets of Western Australia and the United States felt the iron ore price decline. More Chinese steel plants have been forced to halt operations to prevent pollution levels from rising to dangerous levels. More than 26% of 62 percent Fe fines sent to northern China plummeted $US7.66 to $US95.77 in the previous seven days, while Fortescue metal and Gina Reinhardt’s Roy Hill saw the price of 58 percent Fe fines decline 9% to $US67.70.
There has been a 7 percent or more daily price drop in the final four trading sessions of the year. Global prices for the critical 62 percent Fines product have dropped almost 50 percent since peaking in May at $US237 per tonne. BHP, Rio Tinto, and Fortescue Metals Group’s stock prices all fell on Tuesday in response to the market declines of the previous week.
Given the response to the decline in futures prices on Tuesday, we may expect a lower reduction today. Sixty-two percent Fe fines prices have been at their lowest since February 2020, when they cost $US98 a tonne supplied to northern China.
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Since early 2020, when the first wave of the epidemic was rolling through Wuhan and then other regions of China, pollution-reducing cutbacks and dropping steel product prices have helped pull iron ore prices down, and the Dalian futures market’s iron ore contract is currently at its lowest since then. A fresh wave of production cutbacks imposed by dozens of steel mills, sintering facilities, and steel processors in Hebei and Shandong provinces has sparked the current slump. Tangshan, China’s largest steelmaking city, was included in the latest round of layoffs. Handan, Hebei’s steelmaking capital, received an order late on Monday night ordering steel mills there to reduce output even more between now and the end of the week of November 7.
The futures markets for Chinese steel goods such as rebar (the most commonly used steel product in China) and hot-rolled coal contributed to the decline in pricing (used in cars). As a result, both indexes dropped to their lowest point since February. S&P Global observed that iron ore stockpiles at ports and steel mills are increasing. To reach China’s crude steel objectives for 2021, iron ore stocks at key Chinese ports have been piling up since July.
For the same period in 2020, on the other hand, port stockpiles were at roughly 130 million metric tons. A Singapore-based iron ore dealer estimated that the glut of raw materials might reach 155 million metric tons by the end of 2021, and S&P Global noted that the weak steel demand forecast would only support the oversupply. It will not get any easier for millions of enterprises in a dozen or more Chinese regions as winter approaches up north. Despite all the hoopla about growing coal output, power rationing remains to maintain supply for homes, hospitals, and other critical facilities. It’s increasing, but not enough to make a significant dent in power plant stockpiles just yet.
China’s steelmaking sector since September, production, and demand has been adversely affected. In at least 12 provinces, including Heilongjiang, Inner Mongolia, Shandong, Jiangsu, Zhejiang, Sichuan, Guangdong, and Guangxi, power issues were experienced.