MANILA: Dalian and Singapore iron ore futures fell on Thursday, pressured by worries about demand prospects in top steel producer China, as a surge in COVID infections hit domestic economic activity. Overall sentiment was also dampened by weakening steel demand during holiday and winter season in China.
While China’s momentous dismantling of pandemic controls has brightened the chances of a rebound for the world’s second-largest economy, COVID outbreaks have clouded the near-term outlook.
US President Joe Biden raised concern about China’s handling of its outbreaks hours after the World Health Organisation said Beijing was under-reporting deaths from the disease.
Iron ore’s most-traded May contract on China’s Dalian Commodity Exchange ended daytime trade 1.2% lower at 840 yuan ($122.23) a tonne. On the Singapore Exchange, benchmark February iron ore hit a session low of $114.65 a tonne. It clawed back losses and was up 0.2% at $116.25 by 0730 GMT.
“Steel mills have cut production ahead of the Spring Festival (later this month), and some have issued holiday notices,” Huatai Futures analysts said in a note. Steel benchmarks also fell. Rebar on the Shanghai Futures Exchange shed 0.7%, hot-rolled coil dropped 0.4%, wire rod dipped 0.3%, and stainless steel slumped 2.5%.
The Chinese steel market may recover in 2023, but any gains would be limited mainly due to the lingering downward pressure from market fundamentals and the macroeconomic environment, Mysteel consultancy reported, citing its chief analyst Wang Jianhua. Other Dalian steelmaking inputs were firmer though, with coking coal up 0.2% while coke gained 0.4%.
Coking coal hit a six-week low on Wednesday in anticipation of increasing supply from Australia.
China has allowed three government-backed utilities and its top steelmaker to resume coal imports from Australia, the first such move since Beijing imposed an unofficial ban on coal trade with Canberra in 2020.
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