LAUNCESTON, Australia, Oct 22 (Reuters) – With China’s anti-pollution restrictions starting to take effect, one of the conventional market wisdoms is that this will boost demand for high-grade iron ore.
The logic is sound: If steel mills are restricted as to how much they can pollute, they will use the best possible quality iron ore in order to maximise the amount of steel produced relative to the energy consumed.
This means that ore with an iron content of 62 percent or higher should command a greater period during the winter restriction period than those poorer quality grades, such as 58 percent ore.
It’s still not absolutely certain how much iron ore capacity will be idled, or forced to run at lower production rates, over the winter period as part of efforts to limit air pollution from burning coal.
This time around Beijing has allowed local authorities to set their own anti-smog measures, changing from last winter’s policy of imposing blanket cuts on certain steel-producing regions.