Iron ore falls as China’s ‘zero-COVID’ policy stokes growth concerns
Benchmark Dalian and Singapore iron ore futures tumbled more than 5% in late trade on Friday as China reinforced its tough COVID-19 response policy that has hit economic activity, prompting traders to be more cautious.
The most-traded September iron ore on China’s Dalian Commodity Exchange ended daytime trading 5.1% lower at 825 yuan ($123.47) a tonne, after a four-session advance.
On the Singapore Exchange, the steelmaking ingredient’s most-active June contract fell 5.4% to $137.45 a tonne by 0726 GMT, putting it on track for a fifth weekly loss.
China will fight any comments and actions that distort, doubt or deny the country’s COVID-19 response policy, state television reported on Thursday, after a meeting of the country’s highest decision-making body.
“Overall, we believe the priority issue for the Chinese government’s effort to stabilize the economy lies with the authorities’ handling of zero-COVID policy,” J.P.Morgan analysts said in a note.
The likelihood of a major reversal of such policy is low for the rest of this year, but they said there is room to improve implementation and to mitigate the disruption to economic activity.
“Without such policy improvement it would be highly difficult to bring about 2022 growth close to the 5.5% target,” they warned.
Traders were hopeful that China’s policy support for its slowing economy could continue to shore up market confidence.
The People’s Bank of China has vowed to take monetary policy steps to help businesses hit by the coronavirus outbreaks, while Beijing has pledged to step up policy support.
Spot 62%-grade iron ore bound for China, the world’s top steel producer, remained supported at $144.50 a tonne on Thursday, unchanged from last week and up 18% this year, according to SteelHome consultancy data.
Construction steel rebar SRBcv1, hot-rolled coil SHHCcv1 and stainless steel SHSScv1 on the Shanghai Futures Exchange fell 3.7% each.
Dalian coking coal DJMcv1 shed 3% and coke DCJcv1 lost 2.7%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Sherry Jacob-Phillips and Vinay Dwivedi)