MANILA: Chinese iron ore and steel futures fell on Wednesday after a two-day rally, as traders were cautious about the risks from COVID-19 curbs that have clouded economic growth prospects in the world’s biggest steel producer.
The most-traded September iron ore on China’s Dalian Commodity Exchange ended the morning trade 2.9% lower at 811 yuan ($120.15) a tonne, after hitting its highest since May 6 on Tuesday at 849 yuan. On the Singapore Exchange, the steelmaking ingredient’s June contract was down 1.4% at $126.30 a tonne, as of 0358 GMT.
Analysts say China’s slowing economy will struggle to stage the kind of stunning recovery it achieved from the early depths of the pandemic two years ago, as its formidable export machine teeters and options to revive investment and consumption dwindle.
Mirroring the souring sentiment, foreign investors cut their holdings of Chinese yuan-denominated bonds for the third consecutive month in April. Economic indicators point to an economy struggling from COVID-19 lockdowns, with new home prices in April falling for the first time since December. Some analysts say there is still no end in sight for China’s COVID-19 challenges, despite an improving situation in Shanghai that supports the easing of restrictions.
“China remains without an effective COVID vaccine so it remains to be seen what exactly these ease in restrictions will look like and mean for activity,” said Rodrigo Catril, a currency strategist at National Australia Bank. “Worth noting too that it hasn’t been all good news as new outbreaks are also occurring like in Tianjin and Guang’an, while another district in Beijing has gone into lockdown after a new cluster of infections was found.” Construction steel rebar on the Shanghai Futures Exchange fell 2%, while hot-rolled coil shed 1.3%, Stainless steel dropped 2.3%. Dalian coking coal lost 3.4% and coke slid 2.9%.