* Restrictions placed on China sinter plants in anti-smog campaign
By Manolo Serapio Jr
MANILA, Sept 20 (Reuters) - Chinese iron ore futures fell to their lowest level in nearly two months on Wednesday, pressured by weaker steel prices and an environmental campaign by Beijing that has restricted operations of sinter facilities.
Some local governments have restricted the use of sinter plants, which process smaller iron ore particles such as fines into lump, to improve China’s air quality. The bulk of China’s iron ore imports are fines.
“But it doesn’t affect the operations of blast furnaces, so mills can opt to use lump or pellets more than fines,” said a Shanghai-based iron ore trader.
The most-traded iron ore contract on the Dalian Commodity Exchange was down 2.3 percent at 495.50 yuan ($75) a tonne by 0321 GMT. It touched a session-low of 487.50 yuan earlier, its weakest since July 25.
Weaker futures could weigh further on spot iron ore prices which dropped below $70 a tonne on Tuesday for the first time since July.
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB fell 4.1 percent to $68.85 a tonne on Tuesday, the lowest since July 28, according to Metal Bulletin. The spot benchmark has fallen 14 percent from late August.
“While a pullback from recent highs has long been expected, iron ore is a volatile market and the onset of a downtrend like the current one, inevitably creates nervousness about just how far it has to go,” Ric Spooner, analyst at CMC Markets, said in a note.
Spooner said investors may “remain a little circumspect ahead of next month’s Chinese Peoples’ Congress”, where the country’s leadership could “tilt policy a little further towards reform and away from stimulus and infrastructure spending”.
Weaker steel prices helped drag down iron ore prices.
The most-active rebar on the Shanghai Futures Exchange was last down 1.5 percent at 3,733 yuan per tonne, after falling as far as 3,707 yuan, the lowest since Aug. 16.
In a potential risk for Chinese steel demand, Beijing said it would suspend construction of major public projects during winter to improve the capital’s air quality.
Construction of road and water projects, as well as demolition of housing, will be banned from Nov. 15 to March 15 within the city’s six major districts and surrounding suburbs, the official Xinhua News agency reported on Sunday.
$1 = 6.5680 Chinese yuan Reporting by Manolo Serapio Jr.; Editing by Joseph Radford