Iron ore dips ahead of China holidays, Winter Olympics
Iron ore prices fell on Monday as traders turned cautious ahead of the Spring Festival holidays and Beijing Winter Olympic Games, shrugging off a further liquidity-easing move by China’s central bank.
Iron ore’s most-traded May contract on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trading 1.7% lower at 740 yuan a tonne, after stretching last week’s rally up to 771.50 yuan in early trade, its highest since Oct. 13.
The steelmaking ingredient’s most-active March contract on the Singapore Exchange SZZFH2 fell 2.7% to $133.30 a tonne, as of 0707 GMT, after touching a contract high of $141.40 a tonne earlier in the session.
The Spring Festival season in top steel producer China runs from Jan. 31 until Feb. 6, but steel mills’ operations are expected to remain curtailed throughout February to improve air quality during the Beijing Games.
On Monday, China’s environment ministry said Beijing and the surrounding Hebei province would take emergency actions to curb heavy pollution, as it warned of “very unfavourable” weather conditions ahead of the Olympics, suggesting tighter steel production controls in the coming weeks.
But any pullback in iron ore prices may be limited as underlying sentiment remained positive amid China’s intensified monetary easing efforts to prop up an economy facing headwinds from fresh COVID-19 curbs and the property downturn.
The People’s Bank of China cut the 14-day reverse repo rate on Monday, after lowering a slew of key short- and medium-term rates last week.
“The system will be awash with hot money and liquidity, with investors using industrial metals as a speculative proxy for 2022 economic growth,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.
Construction steel rebar SRBcv1 on the Shanghai Futures Exchange dropped 1.1%, while hot-rolled coil SHHCcv1 shed 1%. Stainless steel SHSScv1 slumped 4.2% after last week’s rally.
Dalian coking coal DJMcv1 slid 3.9% and coke DCJcv1 dipped 1.6%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Sherry Jacob-Phillips)