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Demand concerns drag iron ore to a 2-week low

Iron ore futures in China fell to a two-week low on Monday, under pressure from expectations of further output cuts by steel producers reeling from weak demand and tighter environmental controls.

The steelmaking commodity fell 40 percent last year, marking its third annual decline, as a global glut overwhelmed a market hit by an economic slowdown in top consumer China.

There is unlikely to be a lot of restocking among Chinese mills ahead of the week-long Lunar New Year break in February, traders said.

"We don't see iron ore demand picking up before the holidays. It may only improve by the end of February or beginning of March," said a Shanghai-based trader.

North China's Hebei Province, which makes a quarter of the country's steel, has pledged to cut steel output by 8 million tons this year to address overcapacity and air pollution, the Xinhua News Agency reported on Friday.

"People expect some small and medium-sized mills that are not environmentally qualified to be forced to stop production for a long period of time," the Shanghai trader said.

To tackle overcapacity, Chinese Premier Li Keqiang said the government "will let businesses compete against each other and let those unable to compete die out."

That could further curb demand for iron ore, with stocks of imported material at China's ports near their highest level since May 2015, based on data from industry consultancy SteelHome.    

"Rising iron ore exports from key suppliers and declining demand is expected to weigh on prices in the coming months," ANZ said in a note.

From China Mining