China's steel mills cut production, causing iron ore prices to plummet
December 15 20:09:38, 2018
Affected by tightening credit conditions and the cooling of the real estate market, China's steel mills have begun to cut production, causing iron ore prices to fall to a 15-month low. China is the world's largest steel market. According to data from Platts Energy, the spot price of iron ore fell by 7.2% to $128.50 per tonne on Tuesday, the lowest level since July last year, and the biggest one-day drop in 26 months. Iron ore prices have fallen more than 30% in the past six weeks. The rapid decline in prices has caused a huge gap between spot prices and quarterly contract prices, prompting Chinese steelmakers to renegotiate contracts. Traders said that some steelmakers threatened that if miners refused to lower the October-December contract price, they would break the contract. China's small and medium-sized steel producers' production cuts are the latest evidence that the Chinese government's tightening of monetary policy has led to a slowdown in demand for raw materials. Although China's steel demand outlook has not changed in recent weeks, traders and executives say that some steel mills have been exhausted, forcing them to cut output and reduce iron ore purchases. Consulting firm M ySteel estimates that 5% of China's steel production has been temporarily suspended in recent weeks. Small steel mills that cut production usually buy iron ore in the spot market, mostly from Indian miners, so their absence may cause a disproportionate drop in spot prices. An important source of steel demand – the construction industry has slowed this year as the Chinese government is trying to cool the real estate market. [According to the comprehensive analysis of the article "Financial Times" in the UK]
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