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Iron ore has endured one of the worst weekly performances ever, as Chinese steel mills dumped their commodities in response to government production restraints and the cooled real estate market.
Steelmaking raw material that gave a blow Record high of over $ 230 per ton It traded at $ 100.80 on Friday in May, down 22% in a week, according to S & P Globalplatz pricing.
Analysts said the last sale of this size occurred during the 2008 financial crisis.
Beijing hopes that the vast steel industry will keep production of just over a billion tonnes flat this year to slow down the steel-intensive economy, which has recovered strongly from the early stages of the pandemic.
As diplomatic tensions with Australia, the world’s largest producer of iron ore, boil, the Chinese government is playing an active role in curbing steel production towards the end of the year, analysts and traders say.
Tom Price, an analyst at Liberum, a London-based brokerage firm, said: “No one believed they would, but they seem to.”
Crude steel production in China fell by 8% and 12% in July and August, respectively, but still increased by 5% since the beginning of 2020, with even more significant cuts for Beijing to reach its target. It suggests that it will be done.
Eric Hedborg, a lead iron ore analyst at consultancy CRU, said: “There is no longer any demand for additional volumes.”
According to traders, the restraint has forced Chinese steel mills to panic to reduce iron ore inventories by dumping contracted cargo into the secondary market at significantly discounted prices.
Another factor that weighs on iron ore is the Chinese real estate market. Construction activity is expected to slow in China from the fourth quarter to 2022.
Analysts Liquidity crisis at Evergrande, China’s most debt-rich real estate company could lead to credit being distributed for other developers.
“The real estate sector is a big concern,” said Hedborg. “Evergrande is what people are paying attention to in China as a leading indicator of future construction activities.”
The dramatic fall in iron ore prices will also have a significant impact on major mining companies that have paid record dividends to shareholders against the backdrop of rapid growth from the iron ore business.
Anglo American and Rio Tinto shares withstood the biggest fall in London’s FTSE 100 Index on Friday after UBS drastically lowered earnings forecasts and encouraged clients to sell.
“Iron ore supply was largely stable in 2021, but will increase in the coming months if Vale and Rio Tinto can achieve the 2021 guidance,” said UBS analyst Myles Allsop. “This will cause a material build. [up] Iron ore inventories at Chinese ports have fallen, and iron ore prices have fallen sharper than previously expected over the next six months. “
The dramatic drop in iron ore prices is due to the record level in China for coking coal, another raw material needed to make steel. Due to supply shortage..
Domestic coking coal prices reached $ 5,77 per ton on Friday, rising almost 60% last month. Covid-related supply turmoil has hit imports from Mongolia, but Australian coal cannot enter China due to a ban imposed by Beijing.
Iron ore tumbles 20% in worst week since 2008 financial crisis Source link Iron ore tumbles 20% in worst week since 2008 financial crisis
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