Iron ore extends losses on China steel output cuts

Iron ore futures slipped to around CNY 763.5 per tonne on Wednesday, their lowest in six weeks, as traders reacted to fresh signals of production curbs in China. Mills in Tangshan, the country’s most important steelmaking hub, have been instructed to cut sintering output by 30 percent starting August 25 and blast furnace output by 40 percent from August 31. While these restrictions are meaningful, they are less severe than earlier market expectations of a full production halt, tempering hopes for a sharp supply-driven rebound in iron ore prices.

Transport curbs across the Beijing–Tianjin–Hebei industrial region are also expected to hinder shipments of iron ore and finished steel products. The measures are part of broader efforts to improve air quality and reduce overcapacity, but they add near-term pressure to metals demand by slowing construction activity and dampening logistics flows.

At the same time, global supply dynamics remain steady. Major exporters in Australia and Brazil have maintained strong shipment levels, ensuring that seaborne supply remains ample even as China trims demand. This backdrop has put additional downward pressure on prices.

The latest earnings from BHP Group underscored the demand challenges. The mining giant reported its weakest annual underlying profit in five years, at 10.16 billion dollars for the year ended June 30, down 26 percent from a year earlier. Management pointed directly to softer Chinese demand as a key driver, a worrying signal given that China alone accounts for roughly 75 percent of global seaborne iron ore imports and produces just over half of the world’s steel.

The broader macro picture also reflects weakness in end-use sectors. China’s property market remains under strain, with new home prices falling for a second consecutive month in July. Construction demand has been further hit by extreme summer weather, with both heavy rainfall and high temperatures slowing work on infrastructure projects. These factors have combined to push China’s crude steel output to a seven-month low in July, exacerbating demand pressures for raw materials.

Looking ahead, the trajectory for iron ore prices will hinge on whether Beijing introduces additional stimulus to support construction and property activity, and on how strictly steel production cuts are enforced in Tangshan and other regions. Without stronger demand signals, iron ore prices may remain under pressure into early autumn, even if temporary supply-side constraints provide some short-lived support.