LAUNCESTON, Australia, Oct 5 (Reuters) – Unlike the turbulence being experienced by many other commodities, iron ore prices have snoozed through the past seven months, staying locked in a narrow range. A shift in China’s winter pollution abatement strategy could cause iron ore prices to awaken, but it’s far from clear as to which way they may break.
China’s Ministry of Environment and Ecology issued its anti-pollution plan last week, allowing local authorities to adopt measures based on regional emissions levels rather than imposing blanket output curbs on heavy industry.
At first this was seen by the market as a loosening of strict air quality rules, the result being that heavy industries such as steelmaking wouldn’t face output curbs as severe as they did last winter.
This would mean that steel mills could continue to operate at high rates over winter, potentially creating a surplus of the metal at a period of traditionally slack demand.
Certainly, investors in steel took this view. Benchmark Shanghai rebar dropped to 3,942 yuan ($574.63) a tonne on Sept. 28, down 2.8 percent from the previous day’s close, which came before the ministry announced its plans. However, there is now some uncertainty as to what the change in policy will