Iron ore has stumbled back below $80 a tonne

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Iron ore made it three declines on the trot on Tuesday, stumbling back below the $80 a tonne level in the process.

According to Metal Bulletin, the spot price for benchmark 62% fines slid 2% to $79.62 a tonne, trimming its gain in 2016 to 82.7% in the process.

The weakness in the benchmark price filtered through to both lower and higher grade ore with similar declines also reported.

Metal Bulletin put the weakness down to severe air pollution in the north of China, something that saw steel mills and construction sites asked to halt activity to help improve air quality.

“Steel mills in several provinces including Hebei were asked to cut production as part of attempts to control severe smog pollution in the north of the country,” analysts at the group said. “At the same time, construction sites were also asked to stop, which led to a sharp decrease in demand.”

The group also expects a seasonal slowdown in iron ore markets will likely remove some support for prices in the days ahead.

In overnight trade on the Dalian Commodities Exchange, the most actively traded May 2017 contract added 0.46%, closing the session at 571 yuan.

There were almost identical gains recorded in both rebar and coking coal futures, suggesting that sentiment towards steel markets may be improving after several days of weakness.

That may have been assisted by news that the major Chinese steel producing province of Hebei plans to reduce close to 20 million tonnes steel production capacity next year, more than the 14.2 million tonne reduction seen in 2016.

The province accounts for around 25% of all Chinese steel output, according to the state-run Xinhua newsagency.

Trade in Chinese futures will resume at midday AEDT.

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