BEIJING (Reuters) - China iron ore futures are on pace for their biggest monthly decline since May 2016 amid increasing concerns about demand as government inspections have curtailed steel production and ample inventories.
The Dalian Commodity Exchange’s most-traded iron ore contract, for January delivery, was down 1.6 percent at 451.5 yuan ($67.63) per tonne at 0301 GMT, after falling by 3.5 percent on Thursday.
The contract is on track to post a fall of 19 percent in September. The contract is up 1.1 percent for the third quarter.
On the Shanghai Futures Exchange, the most-traded construction steel contract was down 0.9 percent at 3,610 yuan per tonne but was still on course for a quarterly gain of around 13 percent, the most since the first quarter of this year.
“The market is concerned about both rising supply and lower demand from China as it curbs local iron plants and steel mill activity,” ANZ analysts wrote in a note on Friday.
Chinese regulators have shuttered steel mills that fail to comply with environmental rules as part of a wider government effort to combat air pollution ahead of both the winter season and as the country prepares for its National Party Congress in October.
The city of Xuzhou in Jiangsu province announced a 30 percent production restriction on steel during the winter heating season, according to a statement from the Xuzhou government.
Xuzhou is not one of the 28 cities in northern China required to undertake winter curtailments by the Ministry of Environmental Protection. It will also extend the coking time in coke production furnaces to 36 hours or more — a move that leads to less dust being produced.
Dalian’s most-traded coke futures also continued to lose ground after the market declined the most in 15 months at the close of trading on Thursday, slipping 0.96 percent from the previous session close to 1,903 yuan per tonne in early trade.
Market activity has slowed down ahead of the week-long “Golden Week” holiday in China starting from Oct. 1, said traders and analysts.
“You can’t trade during that time ... investors are relatively cautious,” to avoid big risks, said Zhao Xiaobo, an analyst at Sinosteel Futures in Beijing.
Coking coal was down 1.3 percent at 1,129.5 yuan per tonne. The contract has slumped 23 percent since Sept. 12.
Reporting by Tom Daly; Editing by Christian Schmollinger