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China suspends construction before military parade, causing iron ore to slide

The price of iron ore futures fell on Thursday, after the Chinese government suspended construction activities ahead of an upcoming military parade in Beijing.

The January contract for iron ore most actively traded on China's Dalian Commodity Exchange fell by 2.94%, to 775 Yuan ($108.06), per metric ton.

As of 0730 GMT, the benchmark September iron ore price on Singapore Exchange was down 1.36% at $102.1 per ton.

On September 3, the military parade will commemorate World War II's end.

Atilla Winnel, Navigate Commodities' managing director in Singapore said that the Chinese authorities had ordered the suspension in construction in at least twelve provinces in the lead up to and during the event.

It's therefore not surprising that Shanghai rebar futures and DCE/SGX Iron Ore Futures have experienced significant selling.

The Chinese consultancy Mysteel stated in a Thursday note that the demand for construction steel in China is expected to be stable in August. This will be supported by new projects. However, recent bad weather has caused construction delays.

China's new loans in yuan have been broadly contracting in July, for the first two decades. This indicates a weak demand from the private sector amid ongoing trade negotiations with Washington.

This was the largest monthly drop since December 1999 and the first contraction in the credit growth since July 2005. The central bank has not loosened policy despite improvements in credit growth.

Coking coal and coke both fell by 6.25% and 4.32 % respectively.

Mysteel reported that China's coking market softened after a shopping spree. End-users increased material cost control, Mysteel stated in a separate report.

The benchmarks for steel on the Shanghai Futures Exchange have fallen. Rebar fell 1.82%; hot-rolled coils dropped 1.18%; wire rods dropped 1.38%; and stainless steel declined 1.14%.

(source: Reuters)