Iron ore reversed gains earlier in the session as investors eyed the steel market in China, the world’s largest supplier. In November, production dropped to the lowest level for this time of year since 2017.
The country’s crude steel production could total 1.03 billion tonnes this year, down from a record 1.065 billion tonnes in 2020, according to an executive at the China Iron & Steel Association.
Based on this figure and official data showing 946.4mt produced in the first 11 months, December production could total 83.6mt compared to 69.3mt last month.
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Although it is difficult at this stage to calculate what actual production will be in December, there is a consensus that the volume will be higher because steelmakers have already done more than enough to fulfill their promise to reduce steel produced compared to last year. However, the need for blue skies during the Winter Olympics in early 2022 may impose further limits on production.
“Steel production is expected to increase marginally, although the Winter Olympics will limit any increase,” said analysts at brokerage GF Futures. “Iron ore prices are expected to be volatile, with limited decline due to healthy mill margins and the material’s relative value relative to other ferrous products.”
Even with Wednesday’s decline, iron ore futures are still showing gains for a fifth week, having lost more than half their value since May. Prices rose on optimism about rising steel production and expectations that China will inject fiscal stimulus next year to boost the economy.