China’s iron ore futures dropped more than 2 percent to a four-month low on Monday and were on track for a second straight monthly drop as concerns grow about waning demand due to Beijing’s winter smog crackdown on steel mills.

The most-active iron ore contract for January delivery on the Dalian Commodity Exchange fell 2.7 percent to 427.5 yuan ($64.34) a tonne by 0247 GMT, after earlier touching 423.5 yuan a tonne, the lowest since June 27. Prices are on track for a 5 percent drop in October.

“Iron ore demand has come under pressure as steel mills stepped up production cuts,” said analysts from Hongyuan Futures in a note.

Last week, the utilisation rate at steel mill blast furnaces across China fell to the lowest level since 2012 at 71.13 percent, and as low as 66.03 percent in the top steelmaking province of Hebei, data from Mysteel consultancy showed.

Tangshan, the country’s top steel-making city, was ordered to make deeper cuts over Oct. 24-27 as adverse weather may worsen the smog.

More rigorous pollution curbs are expected in November as manufacturers in 28 cities in northern China will be asked to stagger production to reduce pollutant emissions.

Air quality in the Beijing-Tianjin-Hebei region showed no improvement in September compared with last year, according to data from the Ministry of Environmental Protection (MEP), putting more pressure on authorities to meet politically crucial pollution reduction targets.

The most-traded steel rebar futures on the Shanghai Futures Exchange slid 1 percent to 3,583 yuan a tonne.

Spot steel rebar prices fell 0.6 percent to 4,265 yuan a tonne on Friday, according to data from Mysteel website.

“Steel output has been declining due to production cuts amid environmental orders, while demand is unstable as the peak season for construction is over,” said the Hongyuan analysts’ note.

The coking coal contract for January delivery rose 1 percent to 1,114 yuan a tonne. Coke futures slid 0.6 percent to 1,723 yuan a tonne on Monday.

“Demand for raw materials may further decrease ahead of winter as mills might cut stockpiles if production curbs continue stepping up,” said Hongyuan Futures.
Source: Reuters (Reporting by Muyu Xu and Josephine Mason; Editing by Tom Hogue)

• [Editor:Wang Linyan]