Iron ore futures are getting hammered, falling over 4% on Friday.
Here’s the scoreboard at the mid-session break in China.
SHFE Rebar ¥3,601 , -1.75%
DCE Iron Ore ¥435.00 , -4.08%
DCE Coking Coal ¥1,098.00 , -0.14%
DCE Coke ¥1,734.00 , 0.29%
The January 2018 contract on the Dalian Commodities Exchange is currently down 4.08% at 435 yuan, adding to the losses seen on Thursday evening.
It briefly touched a low of 434 yuan, the lowest level since October 12.
The losses are being put down to weak steel mill demand in China ahead of looming production cuts that will be fully implemented by November 15.
“More cities, including Tangshan, have been ordered to deepen production cuts during the winter season,” Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen, told Reuters.
“Low-grade iron ore prices have almost touched the bottom, but we don’t see any support for prices in the near term due to falling operational rates at mills.”
Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank, agrees with that assessment, noting that if there is to be any demand from mills, it’s likely to be for more efficient, higher grade ores.
“The winter cuts to China’s steel production have also increased the preference for higher grade ores,” he says. “China’s focus on environmental protection though means some of the switch to higher grade ores is permanent.”
China’s government has introduced steel production cuts over winter months in an attempt to help improve air quality in northern provinces.
The cuts have increased concern over the outlook for iron ore demand.
Trade in Chinese commodity futures will resume at 4pm AEDT.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.