Global resources firm BHP Group flagged the increasing possibility of steel production cuts in the second half of the year, following the high recorded this month.
- In a commodities outlook report, BHP noted the high possibility that China would implement “stern cuts” in steel output in the second half after its peak industry body this month which it said is “testing the bullish resolve of the futures markets.”
- Prices have posted steep declines in the second half of July and early August but remain at historic highs at around $160 per ton. Iron ore prices have been elevated since the tailings dam tragedy in Brazil in 2019.
- Chinese futures plunged 2.5% to close at the lowest level in nine months since November 2020, while those in Singapore dropped 6.5% to $147.95 a ton, on track for a fifth straight weekly loss.
- Aside from structural market-based drivers, BHP also expects safety and environmental inspections to influence the average level of seasonal volatility of Chinese domestic iron ore production.
Iron ore concentrate production in China has recorded growth in the last three years.