Steel mills in southwest China's Yunnan province have been asked to cut production to fulfil government orders to keep 2023 output at last year's level.
The instructions given to steel mills started to suppress iron ore prices.
Iron ore prices imported from North China decreased by 3.58% to trade at $110.07 per tonne on Friday.
The most-traded September iron ore futures contract on the Dalian Commodity Exchange closed down 2.68% at 834.5 yuan ($116.56)/mt on Friday, the lowest since 13 July.
Steel output in the first half increased 1.3% from a year earlier to 535.64 million mt, government data showed, so Beijing will have to cut output in the second half if it wants to restrict output to the 2022 level.
Yunnan accounts for about 2 per cent of China's steel output, but analysts said the news reinforced the sense that a nationwide production cut was coming.
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