MANILA: Dalian and Singapore iron ore futures fell on Monday, while benchmark steel prices in Shanghai also came under pressure, as COVID-19 outbreaks in China revived worries about crippling lockdowns that dampen demand in the world’s top steel producer.
The most-traded iron ore for September delivery on China’s Dalian Commodity Exchange slumped 3.2% to 891 yuan ($132.08) a tonne in early trade, the lowest since June 1.
On the Singapore Exchange, the steelmaking ingredient’s most-active July contract tumbled 4.5% to $133.35 a tonne. Beijing’s most populous district Chaoyang announced three rounds of mass testing to quell a “ferocious” outbreak, after the city recently relaxed curbs. Mass testing was also announced on Saturday in the Shanghai commercial hub, following a recent two-month lockdown.
An outbreak has also been detected in the Inner Mongolia region, a major producer of metallurgical coal, another key steel input. Recent lockdowns in China, which has a tough zero-COVID policy, have sharply slowed economic activity, adding to a grim global outlook amid the fallout from the war in Ukraine and a worldwide rush to tighten monetary policy to curb inflation.
“Fresh lockdowns and mass testing in Beijing, Shanghai, and now Inner Mongolia - the new epicentre of China’s COVID outbreak - is the realization of the ferrous market’s worst fears,” said said Atilla Widnell, managing director at Navigate Commodities in Singapore.
Data showing new bank lending in China jumped far more than expected in May, which may be used on infrastructure spending, failed to perk up traders. “There had been genuinely optimistic hope that Chinese authorities might refrain from reversing back into economically crippling lockdowns, but that hope is now crumbling before us,” Widnell said. Construction steel rebar on the Shanghai Futures Exchange fell 2.1%, while hot-rolled coil dropped 1.8% and stainless steel shed 2.2%. Dalian coking coal slumped 2.1% and coke lost 1%.