Iron ore is poised for the first weekly drop in more than a month on concern that demand will ease in China as data showed further weakness in the economy and mills around the capital were ordered to curb output for a parade.
Ore with 62 percent content at Qingdao is 1.6 percent lower this week after a run of five weekly advances, according to Metal Bulletin Ltd. Prices lost 1 percent to $55.84 a dry metric ton on Thursday, dropping for the fourth time in five days.
Iron ore tumbled last month to the lowest level in at least six years as Rio Tinto Group and Vale SA boosted low-cost supplies, swelling a global glut just as China’s economy slowed. Some mills around Beijing have been ordered by the government to cut output to clean up the air for the parade in early September, with RBC Capital Markets LLC saying the curbs would hurt demand. A private gauge of Chinese manufacturing on Friday sank to the lowest level in more than six years.
“Expectations that steel output cuts will translate to weaker demand for iron ore are weighing on prices,” Dang Man, an analyst at Maike Futures Co. in Xi’an, China, said by phone. “It will be difficult to see big rises in iron ore over the next two weeks. Beyond that, demand will still be weak.”
The parade will be held on Sept. 3 to mark the 70th anniversary of Japan’s surrender in World War II. Before that, Beijing will host the world track and field championships. The restrictions on mills follow similar moves made last year for the Asia-Pacific Economic Cooperation meeting in Beijing.
As much as 6 million tons of steel output may be cut, more than was lost for the summit last year, according to Mysteel Research’s chief analyst Xu Xiangchun. The disruption -- which covers plants in Hebei, the top steel-making province -- may reduce iron demand by about 10 million tons, according to Australia & New Zealand Banking Group Ltd.
The preliminary reading of China’s Purchasing Managers’ Index from Caixin Media and Markit Economics was at 47.1 for August, compared with the final print of 47.8 for July, private data showed Friday. The release is the first major indicator for August and follows weaker-than-expected data on investment, industrial output, retail sales and exports in July.
Global steel production fell 3.8 percent to 132.9 million tons in July from a year earlier, according to the World Steel Association, which collates figures from 65 countries. In the first seven months, production dropped 2.1 percent.
“The impact of weaker spot demand around Beijing appears to be taking its toll,” ANZ said in a report on Friday. Sentiment was also by hurt by the news that global steel output contracted, it said.