Dalian and Singapore iron ore futures slumped for a fourth consecutive session on Wednesday(Aug 17), trading near US$100 a tonne, as electricity rationing in parts of China has led to steel mill shutdowns.
Iron ore's most-traded January 2023 contract on China's Dalian Commodity Exchange tumbled as much as 4.4% to 683.50 yuan (S$139.3) a tonne, its lowest since July 28.
On the Singapore Exchange, the steelmaking ingredient's front-month September contract fell 4.7% to US$100.70 a tonne.
Analysts said a heatwave gripping several regions in top steel producer China since mid-July has caused power shortages, forcing authorities to ration electricity.
In China's southwestern Sichuan province, authorities began limiting electricity supply to homes, offices and malls on Wednesday.
Nearly 20 steel mills in China's southwest regions had suspended operations as of Wednesday, according to steel industry data provider SMM.
The power rationing is expected to continue for a week, SMM said.
"Our base case is that the power rationing this time around should be milder than that seen last year in terms of duration and scale," JP Morgan analysts said in a note, adding that it will likely be confined to few provinces.
Rising iron ore supply in China also weighed on prices, analysts said.
Stocks of imported iron ore at Chinese ports have steadily risen over the past seven weeks, hitting 138.6 million tonnes as of Aug 12, the highest since mid-May, according to data from Mysteel consultancy.
As some factories have been ordered to halt operations to alleviate power shortages, worries also intensified about steel demand in China, which has already been weak amid a downturn in the country's property sector.
Rebar on the Shanghai Futures Exchange shed 3.5%, while hot-rolled coil lost 3.4%. Stainless steel was largely flat.
Other steelmaking inputs also fell, with Dalian coking coal down 1.5% and coke shedding 4%. REUTERS