Iron ore price plunges on Chinese steel meltdown

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 and is set to fall further today as Chinese steel prices continue to slide.

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.

On Monday iron ore hit 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.

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