Iron ore prices plunge 40% in one month amid China's steel production decline forecast

[Asia Economy Reporter Park Byung-hee] The Wall Street Journal (WSJ) reported on the 23rd (local time) that the price of iron ore, a raw material, has fallen by about 40% in just over a month due to forecasts of reduced steel production in China.

According to S&P Global Platts, the spot price of iron ore containing 62% iron closed at $139.10 per ton on the 20th. It even dropped to $130.20 per ton at one point last week. Iron ore prices reached an all-time high of over $233 per ton in May and were still above $200 per ton just a month ago.

Iron ore prices are plummeting due to concerns over slowing demand in China, which consumes more than half of the world's steel.

China is trying to reduce its previously surged steel production to cut carbon emissions. The steel industry accounts for 15% of China's carbon emissions.

The Chinese government plans to limit steel production this year to a level similar to last year. Steel production in July fell 8.4% year-on-year, but from January to June, it recorded increases compared to the same months last year. This has led to forecasts that large-scale production cuts will be inevitable in the second half of the year.

Rohan Kendall, an analyst at consulting firm Wood Mackenzie, said that to achieve the government’s goal of maintaining steel production at last year’s level, steel output must be significantly reduced for the remainder of this year.

Australia’s Commonwealth Bank estimated that production from August to December must be cut by 12% compared to last year to meet the target.

Worsening economic indicators such as production, consumption, and investment are also negative factors for iron ore prices, as signs of economic slowdown are emerging in China. The International Monetary Fund (IMF) lowered its forecast for China’s economic growth rate this year from 8.4% to 8.1% at the end of last month.

World’s largest mining company BHP Billiton stated that it expects China’s iron ore demand to weaken in the medium term.

This content was produced with the assistance of AI translation services.