MANILA: Dalian iron ore fell on Tuesday, sharply reversing gains from the early session, after a spokesperson for China’s state planner said the country will keep reducing steel output this year.
Adding to concerns over demand prospects for the key steelmaking raw material, China’s steel production hub Tangshan implemented another round of COVID-19 lockdown in four districts, for at least three days from Tuesday, the local government said in a statement.
The most-traded September iron ore on China’s the Dalian Commodity Exchange dropped as much as 1.7% to 901.50 yuan ($141.48) a tonne, after touching 942 yuan earlier in the session, the highest since April 6.
On the Singapore Exchange, the most-active May contract was down 1.7% at $152.25 a tonne, as of 0350 GMT. Top steel producer China will reduce crude steel output this year, after slashing production in 2021 in line with its goal to control carbon emissions, said a spokewoman for China’s state planner, the National Development and Reform Commission.
Expectations for additional policy support for the world’s second-largest economy, which faces risks of a sharp slowdown due to COVID-19 lockdowns and headwinds brought on by the Ukraine war, have pushed Dalian iron ore prices higher by more than 30% this year.
Yet the timing and extent of the anticipated additional stimulus measures remain uncertain. “It remains to be seen how extensive the Chinese policy response will be,” J.P.Morgan economists wrote in a note.
“Slower Chinese growth is expected to linger into 3Q before rebounding, raising the risk of near-term spillovers to regional trading partners and commodity exporters,” they said. Construction steel rebar on the Shanghai Futures Exchange rose 1%, while hot-rolled coil climbed 0.8. Stainless steel jumped 3.5%. Dalian coking coal fell 1% and coke shed 0.8%.