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Overproduction Weighing on Iron Ore and Steel

June 17, 2016 at 14:58 by Brent Lantzy

The highest-volume iron ore contract (September ’16) on The Dalian Commodity Exchange closed at 372.5 yuan per ton ($56.52), up 6.5 yuan on Friday to end the week slightly higher than where it began at 367.5 yuan per ton.

According to Metal Bulletin, the spot price for benchmark 62% fines for delivery to the Qingdao port rose by 0.1% to $50.70 per ton.

Weakened construction activity in China during the summer months has limited the demand for iron ore, the main ingredient used in steel production. Goldman Sachs expects major global iron ore miners to add another 10 million tons to the seaborne market in the third quarter of this year.

Chinese officials ordered the top steelmaking city of Tangshan to curb output beginning on Monday in an effort to improve air quality during an international conference there Spongebob Bounce House this week, which helped to lift rebar futures on the Shanghai Futures Exchange to a five-week high of 2,189 yuan ($332.11) on Monday. However, the price has since retreated, settling at 2,054 yuan per ton at the end of Friday trading. Goldman Sachs estimates the cuts could equal as much as 1.3 million tons of steel.

Official data released on Monday by the National Bureau of Statistics shows that China’s steel production continued to rise in May, reaching 70.5 million tons, up 1.8% year on year, and only slightly lower than the record high of 70.65 million tons produced in March.

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