MANILA: Dalian iron ore hit a fresh six-month high on Friday and was on track for a third straight weekly rise on optimism about China’s economic recovery prospects in 2023, with traders brushing aside a potential wave of local Covid-19 infections.
The steelmaking ingredient’s most-traded May contract on China’s Dalian Commodity Exchange rose as much as 3% to 841.50 yuan ($120.65) a tonne, the highest since June 13.
Top steel producer China has begun dismantling its tough “zero-Covid” controls, dropping testing requirements and easing quarantine rules that had sparked street protests and battered the world’s second-largest economy.
“Authorities appear confident that China can face the medical challenges of easing restrictions, suggesting the reopening will happen very rapidly,” said ANZ Chief Greater China Economist Raymond Yeung.
Beijing has also announced measures and plans to roll out more to support an ailing domestic property sector, which accounts for a sizeable portion of Chinese steel demand. ANZ has revised its 2023 GDP growth forecast for China to 5.4% from 4.2%, anticipating the easing of restrictions to boost domestic demand.
But the current wave of Covid-19 infections could prolong the downturn in economic activity in China. The “unease over the speed of China’s Covid policy reversal” has curbed investor enthusiasm over iron ore demand in the near term, Westpac analysts said in a note. Iron ore’s benchmark January contract on the Singapore Exchange was down 1.4% at $109.90 a tonne, as of 0257 GMT.
With the market choosing to focus on Beijing’s positive rhetoric about stabilising the economy, most steel benchmarks also moved higher.
Rebar on the Shanghai Futures Exchange rose 0.7%, hot-rolled coil climbed 0.6%, and wire rod gained 1.2%. Stainless steel dropped 1.7%. Other Dalian steelmaking inputs were also firmer, with coking coal and coke up 0.2% and 0.5%, respectively.
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