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China’s COVID U-turn lifts iron ore after wild swings in 2022

Iron ore futures ended a volatile year firmer on Friday, with the Dalian benchmark settling near a more than six-month high, propelled by optimism around top steel producer China’s unwinding of pandemic controls and economic support measures.

Spot prices of the steelmaking ingredient also rallied this week, scaling a five-month peak as traders brushed aside concerns about surging COVID-19 infections across China. But it was set to mark its weakest year-end finish in three years.

The most-traded May iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended the session up 2.8% at 863 yuan ($124.14) a tonne, after earlier hitting 867.50 yuan, its strongest since June 9. It posted an annual gain of 43%.

On the Singapore Exchange, iron ore’s benchmark January contract SZZFF3 gained as much as 1.8% to $117.15 a tonne, its loftiest since late July.

Spot 62%-grade iron ore jumped to $116 a tonne on Thursday, the highest since early August, SteelHome consultancy data showed.

Iron ore scaled this year’s peak at $163 in March driven by China’s easing of pandemic restrictions and policy support for its slowing economy. It collapsed to $80 levels in November, dragged down by Beijing’s draconian “zero-COVID” policy and a property sector downturn.

“Iron ore is expected to remain strong in the near term (rising to $120/t) and could follow through (rally up to $150/t) in the bull case of a major China credit easing during 1Q’23 and an accelerated China re-opening plan materializing,” Citi analysts said.

Other Dalian steelmaking inputs ended the session slightly lower, with coking coal DJMcv1 and coke DCJcv1 down 0.2% and 0.3%, respectively, while steel benchmarks also rose.

Rebar on the Shanghai Futures Exchange SRBcv1 up 1.8%, hot-rolled coil SHHCcv1 climbing 1.7%, and wire rod SWRcv1 gaining 0.3%. Stainless steel SHSScv1 edged up 0.1%.

Night trading on Friday in Dalian and Shanghai has been cancelled, and both bourses will remain closed on Monday, Jan. 2 for the New Year break. Trading will resume on Tuesday, Jan. 3.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Krishna Chandra Eluri)

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