Pressure on iron or prices should ease for much of this week with China on Holiday until next weekend. Prices in the first week of October and the December quarter won’t move very much because of the long break.
So there shouldn’t be a repeat of September’s sell off which saw a loss of 21% with the price ending at $US62.05 on Friday, according to the Metal Bulletin.
For the week the price lost 2.2%, 9.1% for the month and 4.5% for the quarter. The price lost more than 18% from the most recent high of just over $US76 a tonne in early September.
Apart from a rebound on Thursday, prices ended the week, month and quarter weak and looking to go lower
Investors are now waiting to see the impact of the start last week to the steel production cuts. The holiday means that any impact will be muted and limited to the Singapore futures price.
The first wave of production cuts have halved the rate of steel production in the north-eastern city of Tangshan, the largest steel-producing city in China. This will ultimately affect 20 million tonnes of steel, the equivalent of about 7.5% of national annual production.
Three other key steel-producing cities — Shijiazhuang, Anyang, and Handan — are to announce similar cuts. In addition, producers will also be mandated to reduce overall coking coal production by 30%.
The production cuts are part of a series of production suspensions in and around Beijing aimed at cutting the now thick and notorious winter pollution and smogs.
About 70% of electricity in north-east China comes from coal, leading to a sharp rise in winter pollution levels.
