Iron ore in biggest weekly fall on China’s lingering Covid restriction

BY ONOME AMUGE

Iron ore stumbled to its biggest weekly decline since mid-February as China’s lingering Covid restrictions amid reports of a slight increase in Covid-19 cases resulted in weaker demand for the steel-making ingredient.

Benchmark iron ore futures settled 1.4 percent lower at 796 yuan a tonne, steel bars on the Shanghai Futures Exchange (ShFE) were range-bound, with construction-used rebar for October delivery falling one percent at 4,612 yuan a tonne, while stainless steel futures slipped 0.1 percent to 18,865 yuan a tonne.

Analysts noted that iron ore has fallen around a quarter from this year’s peak, adding that the lockdowns are making it hard for the Chinese government to deploy infrastructure spending at a period when construction is expected to rise.

The situation was further worsened by reports that Sunac China Holdings, the country’s fourth-largest developer, missed a bond payment during the week. The latest default, according to industry watchers, is spurring fears that there could be more to come, which would further weaken the country’s construction sector that is vital for iron ore demand.

However, Huatai Futures, one of the country’s leading futures research firms, noted that iron ore demand is expected to improve in the medium-term as virus cases ease and Beijing implements policies to support growth of the construction industry.

Analysts at Australia & New Zealand Banking Group Ltd. (ANZ), said China’s virus-related restrictions are weakening the impact of support measures during the peak construction season, while property indicators are down.

“Steel production could increase, though looming control measures are a downside risk,” they added.