China iron ore futures made 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, closed down 0.98 percent at 454.5 yuan ($68.45) per tonne.
This means the contract has fallen 19 percent in September, although it is up slightly for the third quarter.
“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.
On the Shanghai Futures Exchange, the most-traded construction steel contract reversed its losses in early Friday trade to close up 1.48 percent at 3,695 yuan per tonne for a quarterly gain of around 16 percent.
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.
Among other steelmaking raw materials, Dalian’s most-traded coke futures also recovered from morning losses to close up 1.22 percent at 1,945 yuan per tonne, having declined the most in 15 months at the close of trading on Thursday.
It is still up 13 percent for the quarter despite having dived 20 percent since Sept. 13 as the market turned bearish.
Trading activity 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 ended down 0.92 percent at 1,133.5 yuan per tonne but is still up 4.2 percent for the quarter. ($1 = 6.6399 Chinese yuan) (Reporting by Tom Daly; Editing by Christian Schmollinger and Amrutha Gayathri)