MANILA: Dalian and Singapore iron ore futures pulled back on Thursday after a seven-session rally as top steel producer China battled a rebound in COVID-19 infections, prompting traders to lock in profits.
Economic growth in the world’s biggest consumer of iron ore and other steelmaking inputs is hitting an early speed bump in the fourth quarter amid widespread coronavirus restrictions, after Beijing reaffirmed its zero-COVID policy.
In China’s southern manufacturing hub of Guangzhou, millions of residents were told on Wednesday to get tested, as infections topped 2,000 for two days running in the city’s worst outbreak so far. The most-traded January iron ore on China’s Dalian Commodity Exchange ended morning trade 1% lower at 678.50 yuan ($93.46) a tonne.
Dalian iron ore hit a two-week high on Wednesday, with a looming bond financing support for Chinese property developers adding fuel to the steelmaking ingredient’s sentiment-driven rebound. On ther Singapore Exchange, benchmark December iron ore was down 1.6% at $87.05 a tonne, as of 0414 GMT.
“China will have to confront the substantial cost of zero-COVID as infections continue to spread,” said Tapas Strickland, head of market economics at National Australia Bank.
Such economic costs had recently fuelled speculations that China would pivot away from its strict COVID containment strategy, but Strickland, like many other analysts, believes a “more comprehensive pivot” is unlikely until March or April, or after winter.
Other Dalian steelmaking inputs also retreated, with coking coal and coke down 1.4% and 2.6%, respectively. Steel benchmarks on the Shanghai Futures Exchange also surrendered some of their recent gains, with rebar down 0.4% and hot-rolled coil dropping 0.3%. Wire rod shed 1%, but stainless steel gained 0.3%.
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