FX.co ★ Iron Ore Firms Up on Steel Production Cuts

Iron ore futures maintained levels around CNY 800 per tonne on Wednesday, approaching a two-week peak amid anticipated reductions in steel production in China. Reports suggest that northern Chinese mills have been instructed to decrease output to ensure clear skies during a military parade scheduled for September 3. These production restrictions could potentially reduce surplus steel in the market, enhance profit margins for mills, and bolster the demand for iron ore. Positive market sentiment has also been fueled by the recent 90-day extension of the US-China trade truce, providing negotiators with additional time to finalize an agreement and contributing to the stabilization of trade relations between the world's two largest economies. Nevertheless, demand remains seasonally weak as extreme heat and heavy rainfall continue to impede construction activities downstream. This slowdown has resulted in a build-up of steel inventories despite the recent uptick in iron ore prices.