Iron ore futures in China edged higher on Thursday as fewer new coronavirus cases in the country outweighed negative sentiment stemming from a rout in global equities that fell after the World Health Organization (WHO) labelled the virus a pandemic.
China has been reporting fewer new coronavirus infections and easing restrictions on businesses and movement of people, boosting hopes of an improvement in demand for the steelmaking raw material. Iron ore on the Dalian Commodity Exchange ended 0.2% higher at 663 yuan ($94.96) a tonne after dropping as much as 2.3% during the session. Futures on the Singapore Exchange also turned higher, up 0.5% in afternoon trade.
Still, caution prevailed as authorities in other parts of the world are resorting to drastic measures amid a worsening health crisis. US President Donald Trump suspended travel to the United States from Europe, except the United Kingdom, for 30 days from Friday, while Italy's 60 million people have been placed under lockdown.
"While such measures may result in a lower peak of infections within each country, they certainly aren't without their economic consequences," Robert Carnell, ING head of research for Asia-Pacific, wrote in a note. China accounts for more than half of the world's steel output and is also the biggest exporter of the manufacturing and construction material.
Commodity broker Marex Spectron said it has a bearish outlook for iron ore demand and supply and macroeconomic conditions in China. "Margins continue to be under pressure with the decline in steel prices," said Marex Spectron analyst Hui Heng Tan. "With pressured margins, it is perhaps unsurprising to see steel rates continue to decline."
Chinese steel mills and traders are sitting on a huge inventory of steel products that is still piling up because downstream demand is far from fully recovering after the epidemic stalled economic activity in the mainland for weeks. Construction steel rebar on the Shanghai Futures Exchange rose 0.4% and hot-rolled coil climbed 0.1%, but stainless steel shed 1.1%.