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market | IST

Iron ore futures down 5%, here’s why

The iron ore futures are lower by close to around 5 percent. According to a quick analysis, the bigger story is in terms of the Chinese steel production that is falling and that will be a good news and a positive read-through for the global steel environment on the whole.

The iron ore futures are lower by close to around 5 percent. According to a quick analysis, the bigger story is in terms of the Chinese steel production that is falling and that will be a good news and a positive read-through for the global steel environment on the whole.
Chinese steel producers are delivering on their promise of lowering their steel production on a monthly basis. For the month of August, that number has come at around 83 million tonne, that would be down by close to around 12 percent on a year-on-year (YoY) basis.
In the last few months, it is gradually becoming lower, even on a month-on-month (MoM) basis at 83 million tonne, it is close to around 4 percent approximately and that is a positive sign because Chinese regulators told the steelmakers that they cannot cross 2020 production levels in 2021.
For the whole of last year, steelmakers did approximately 1,055 mt of steel, so for 2021, they will have to do 1,055 mt as well. Between January 2021 and August 2021, around 728 mt of steel is being produced, that is 5 percent growth on a YoY basis.
For the remaining four months, close to around 80-81 mt of steel should be produced on a monthly basis to comply with the regulation. It would mean that the steel production for the remaining four months will be down by nearly 37-38 mt.
Watch the accompanying video of CNBC-TV18’s Nigel D’Souza for more details.