The main Chinese domestic iron ore benchmark, the Dalian Commodity Exchange contract, dropped around 10% in the week to July 23, the worst weekly performance since February last year.
The contract ended the week at 1,126 yuan ($173.77) a tonne, and has now slid about 17% from its record high in May.
Benchmark spot 62% iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, surrendered 8.8% last week to end at $201.35 a tonne, down from its record high of $235.55 hit on May 12.
The headline reason for the retreat in iron ore has been moves by China, which buys about 70% of global seaborne volumes, to rein in its massive steel sector.
The question for the market is how far spot prices could decline as China’s restricts steel output and producers begin to ship more.
The answer is probably still a wait-and-see if the early signals translate into a trend, or whether they are just a blip.
It’s been no secret that the authorities in Beijing want to cap 2021 steel output at no more than 2020’s record levels, but what appears to have changed is that firmer action is now being taken to achieve this aim.
