Iron ore, ferrous futures dip on China COVID jitters

Dalian and Singapore iron ore futures dropped on Tuesday along with China steel benchmarks as COVID-19 cases in the country weighed down sentiment on the first trading day of 2023.

Top steel producer China’s factory activity shrank at a sharper pace in December as surging COVID infections disrupted production and curbed demand after Beijing largely removed anti-virus curbs, a private sector survey showed.

Iron ore’s most-traded May contract on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trade 0.4% lower at 851.50 yuan ($123.62) a tonne. It hit a more than a six-month high of 867.50 yuan last week.

On the Singapore Exchange, the steelmaking ingredient’s benchmark February contract SZZFG3 was down 0.1% at $116.05 a tonne, as of 0700 GMT.

Some people in Beijing, Shanghai and Wuhan braved the cold and a spike in COVID infections to return to regular activity on Monday, but analysts expect continuing pressures ahead for the world’s second biggest economy.

“Chinese COVID rates are going to have a substantial impact on the ability of factories to produce, on transport to deliver, builders to build and on finance companies to finance,” said John Meyer, an analyst at SP Angel.

Reflecting persistently weak demand amid rising COVID cases despite a slew of support measures for the ailing property sector, China’s home prices fell at a faster pace in December, according to a private survey.

“(COVID-19 pressures) could stall the Chinese economy for a few months, though we suspect China’s authorities will do their best to keep the wheels on,” Meyer said in a Dec. 30 note.

Rebar on the Shanghai Futures Exchange SRBcv1 shed 0.6%, hot-rolled coil SHHCcv1 fell 0.9%, while stainless steel SHSScv1 edged up 0.6%.

Other Dalian steelmaking inputs were under greater pressure, with coking coal DJMcv1 and coke DCJcv1 down 2.6% and 2.9%, respectively.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Sherry Jacob-Phillips and Vinay Dwivedi)