Dalian iron ore climbs up on power curbs

Highlights 

  • Dalian iron ore futures gained more than 5% on Monday.
  • Steel rebar and hot-rolled coils also surged significantly.
  • China wants to limit its greenhouse emissions as a part of its long-term goal to attain carbon neutrality by 2060.

Dalian iron ore futures gained more than 5% on Monday with prices hitting above CNY700 level. At the same time, the prices of steel rebar and hot-rolled coils surged significantly due to production limitations on power curbs. January delivery iron ore futures rose to CNY715 per tonne, up 5.3% during the morning session while the futures closed at CNY703 per tonne, up 3.5%.

The prices of hot-rolled coils and steel rebar on the Shanghai Futures Exchange (ShFE) also surged due to limited production as the region faces restrictions in power usage. The eastern Jiangsu province of China had launched an inspection on companies using more than 50,000 tonnes of coal this month.

Related Article: ASX 200 to rise; BHP, Rio Tinto to surge on higher iron ore prices

Who is driving the iron ore rally?

The ongoing iron ore rally is being driven by China's goal to restrict its greenhouse emissions. The country aims to attain carbon neutrality by 2060. Given the same, it is limiting its steel and aluminium production output.

Good Read: Iron ore tumbles on expectations of steel production curbs in China

Iron ore price rise

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The authorities of the country put a cap on steel production to bring down the inflationary pressure in the commodity market. Apart from this, investors are also tensed with a slump in the country's construction sector. The sales in the Chinese property market tumbled as much as 20% y-o-y in August. Additionally, Evergrande's financial crisis has also added fear among investors, ultimately reducing the demand for base metals in the country.

Related Article: Iron ore tumbles on expectations of steel production curbs in China

On the flip side, recent gains in steelmaking ingredients have recorded a bounce back from previous losses but it is not enough to balance the losses faced by iron ore, amid subdued demand at the mills.

Bottom Line

Iron ore prices gained significantly due to power cut issues in several parts of China and on strict government regulations to limit the use of coal, as a part of the country's goal to reduce greenhouse emissions.

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