China copper smelters plan to cut output after margins fall
The output cuts underscore the industry’s struggle with a shortage of feedstocks caused by recent mine production setbacks.
In a second day of heavy selling on the Dalian Commodities Exchange on Wednesday iron ore futures plunged nearly 8%, last trading around 556 yuan or $81 a tonne while coking coal used in steelmaking dropped 9% to 1,282 yuan ($186).
Regulators recently upped trading fees and margin requirements to cool down the credit-fuelled speculation in iron ore, met coal and rebar, but volatility in the market show no signs of ending.
Steel futures trading in Shanghai declined sharply for a second day on Wednesday with May delivery contracts losing 7.5% to 3,000 yuan or $436 a tonne, on track for the biggest one-day fall on record.
Tuesday saw the price fall 6.7% as the exchange introduce new trading rules in an attempt attempt to quell speculation and the Chinese currency drops to a eight-and-half-year low against the US dollar.
A new 5-year planning document released by Beijing called for the closure of 100 – 150 million tonnes of steel capacity
China forges almost as much steel as the rest of the world combined with more than 800 million tonnes of production expected this year, but the industry is beset with overcapacity and low profitability.
A new 5-year planning document released by Beijing called for the closure of 100 – 150 million tonnes of steel capacity through the end of the decade to increase profitability of remaining producers and tackle pollution.
Shutdowns of older and smaller plants have already reduced steelmaking capacity by some 70 million tonnes this year, far ahead of Beijing’s target for the year.
Authorities are also pushing for consolidation of steel production with a target of 60% market share for the top 10 steelmakers.
The import price of 62% Fe content ore at the port of Tianjin slumped 6.4% to $75.10 per dry metric tonne on Tuesday.
On Monday the benchmark breached the $80 a tonne level for the first time since mid-September 2014. Year to date the price of the steelmaking raw material is up 75% following near-decade lows in December last year according to data supplied by The Steel Index.
