Iron ore futures in China tumbled more than 5 percent to a four-month low on Thursday, pressured by lean demand as the world's top steel producer sustains a crackdown against polluting industries that could limit output.
Tangshan city in China's top steel-producing Hebei province launched a campaign this week to improve air quality, saying steel mills that fail to meet emission standards face suspension and heavy fines. Traders say mills in Hebei were also asked to reduce or suspend production before the One Belt One Road summit in Beijing on May 14-15 to help clear China's skies.
"Firstly, demand for steel is not good enough as people had expected and now we have new restrictions on steel production," said an iron ore trader in Shanghai.
"So you will see less demand for iron ore."
The most-traded iron ore for September delivery on the Dalian Commodity Exchange fell as far as 445 yuan ($64) a tonne, its weakest since Jan. 4. It was down 3.8 percent at 453 yuan by 0224 GMT.
There is also ample supply of the steelmaking commodity in China. Iron ore stocks at the country's ports reached 131.95 million tonnes last week, according to SteelHome. That was not far below the 132.45 million tonnes level hit in March, the most since SteelHome began tracking it in 2004.
Weaker steel demand weighed on steel prices, but they should recover as China's clampdown on polluting mills continues, said the Shanghai trader.
"We heard about mills cutting production or go for maintenance for several days," he said.
The most-active rebar on the Shanghai Futures Exchange was last down 2.2 percent at 2,990 yuan a tonne, off a session low of 2,962 yuan.
Coking coal on the Dalian exchange was down 5.7 percent at 1,006.50 yuan per tonne, after earlier hitting 995 yuan, its lowest since Sept. 30.
China has said it would shut all producers of low-quality steel products by the end of June as Beijing fights pollution.
($1 = 6.9056 Chinese yuan)
