Sierra Leone woos miners to clean energy with $11 billion plan
Most mining firms rely on their own diesel supplies to extract iron ore, diamonds, rutile and bauxite in the resource-rich country.
Dalian iron ore was set for a seventh straight quarterly gain on Wednesday, although a slump in Chinese steel mills’ profit margins weighed on prices in the final trading sessions of June.
The most-traded iron ore contract for September delivery on China’s Dalian Commodity Exchange ended daytime trading 0.7% lower at 1,165 yuan ($180.50) a tonne, down 14.2% from a record high scaled on May 12.
Dalian iron ore, however, was set to close out the quarter with a gain of about 20%, helped by its record-setting rally in May.
Robust raw material demand in China, the world’s top steel producer, had propelled iron ore prices to record highs in a rally also spurred by what Chinese authorities had described as excessive market speculation.
Costly raw materials combined with softening demand for steel products in China are now weighing on steel producers’ profitability, analysts said.
“Steel prices have dropped sharply from May record highs,” said Robert Rennie, head of financial market strategy at Westpac.
“With coking coal at two-year highs and iron ore close to record, steel mill profitability has collapsed.”
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $214.08 a tonne on Wednesday, up 1% from Tuesday’s closing.
“When we scale (China) iron ore inventory to slightly softer steel production or imports, the iron ore price looks increasingly out of line,” Rennie said.
“If these trends of weaker steel production continue through the summer, then that argument becomes even more compelling.”
China is pausing industrial activity to clear air pollution ahead of the Chinese Communist Party’s 100th anniversary celebration later this week.
Some steel producers in the cities of Tangshan and Handan have lowered output, according to analysts with GF Futures Co., while ports near Beijing including Tangshan, Jingtang and Caofeidian also halted work until Thursday afternoon.
(With files from Reuters and Bloomberg)
