Iron ore trims losses ahead of China MLF rate setting

Iron ore prices edged lower on Tuesday as fresh COVID-19 outbreaks in China clouded demand prospects in the world’s top steel producer, although hopes for policy measures to support a struggling domestic economy helped trim losses.
Market focus has turned to the People’s Bank of China, which could cut the rate on its medium-term lending facility on Wednesday.

The most-traded September iron ore futures contract on China’s Dalian Commodity Exchange ended daytime trading 0.1% lower at 901.50 yuan ($134.11) a tonne, after earlier falling to 882 yuan, the lowest since May 31.

On the Singapore Exchange, the most-active July contract for the steelmaking ingredient was down 0.4% at $134.10 a tonne, as of 0735 GMT.

Benchmark 62%-grade iron ore’s spot price in China was assessed at $138 a tonne on Monday by SteelHome consultancy, the weakest since May 30.

China’s hardline zero-COVID policy and fresh infections in Beijing and Shanghai prompted mass testing and renewed restrictions.

“The risk of further lockdowns remains high while the dynamic-zero COVID-19 approach remains in place,” Fitch Ratings said in a statement.

Fitch Ratings cut its economic growth forecast for China this year to 3.7%, from 4.8%, to reflect the impact on activity of recent lockdown measures.

China’s goal to further reduce crude steel output this year to curb emissions also weighed on sentiment, with Baocheng Futures analysts saying mills in Jiangsu, Hebei, Xinjiang and other places have recently been notified of the reduction target.

China’s crude steel output rose 5.1% in April from a month earlier, but its January-April production was down 10.3% from a year ago. The May production figures will be released on Wednesday, along with China’s overall industrial output data.

Rebar on the Shanghai Futures Exchange fell 2.1%, hot-rolled coil shed 2.2%, and stainless steel dropped 2.5%.

Dalian coking coal edged up 0.2%, but coke dipped 0.8%.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Sherry Jacob-Phillips)