China iron ore scales 3-week peak as new virus cases dip further

China’s iron ore futures hit a three-week high on Wednesday as the number of new coronavirus cases in the country continued to fall and after Brazilian miner Vale SA posted a sharp drop in fourth-quarter output of the steelmaking raw material.

The Dalian Commodity Exchange’s most-traded iron ore contract gained as much as 3.2% to 619.50 yuan ($88.94) a tonne in morning trade. That was the highest since Jan. 23, a day before the onset of the Lunar New Year break that was extended to Feb. 2 because of the epidemic.

Iron ore futures on the Singapore Exchange advanced 0.8% to $84.40 a tonne.

Spot iron ore prices also scaled three-week highs, with the benchmark 62% grade settling at $85 a tonne on Tuesday, SteelHome consultancy data showed, amid a gradual reopening of factories.

“There are no significant changes in fundamentals, but things are improving in terms of demand due to business restarts,” said Richard Lu, senior analyst at commodity consultant CRU in Beijing.

But caution should prevail, he said.

“The government is now pushing hard on business restarts, but these should be in an orderly manner and well organised. This means that we are still away from getting normality, and demand will continue to be weak despite improving,” Lu said.

China’s Hubei, the province at the epicentre of the outbreak reported 94 additional deaths and 1,068 new infections as of Tuesday, down from a peak of over 3,000 new cases on Feb. 4, and the lowest number of new cases since Jan. 31.

That added to optimism that the worst of the epidemic, which has so far killed more than 1,100 people in China, may have passed, after the government’s senior medical adviser said the outbreak could be over by April.

“We expect that the rate of resumption of work will be accelerated from next week,” Huatai Futures Co Ltd said in a note.

FUNDAMENTALS
* Vale reported a 22.4% year-on-year decline in fourth-quarter iron ore production, reigniting concerns about supply to top steel producer China.

* Steel traders in China are holding off returning to the market for their usual post-Lunar New Year purchases, their appetites dampened by sluggish demand from a construction sector hit by the coronavirus outbreak.

* Both construction steel rebar and hot-rolled coil on the Shanghai Futures Exchange climbed 0.5%.

* Other ferrous raw materials also rose, with coking coal up 2.0% while coke advanced 1.7%.
Source: Reuters (Reporting by Enrico dela Cruz; Editing by Aditya Soni)