Chinese iron ore futures plunged as much as 7% on Monday, falling for a second straight session and denting steel prices by nearly 4%, as stringent COVID-19 restrictions prompted traders to be cautious and fuelled concerns over global demand.
The capital city of Beijing has implemented rounds of COVID-19 tests, closed entertainment venues, banned dine-in services at restaurants and urged staff at certain areas to work from home, as parts of efforts to persist its “dynamic-zero approach”.
“It’s not looking pretty this week with even more negative COVID-related headlines for Beijing, Guangdong, and Jilin released over the weekend,” said Atilla Widnell, managing director with Navigate Commodities.
“It’s looking increasingly likely that Chinese blast furnaces will struggle to justify high utilisation and operating rates in a demand- and margin-negative environment,” he added.
China’s iron ore imports in April fell nearly 13% to 86.06 million tonnes from a year-ago period, data from the customs administration showed.
The most-active iron ore futures on the Dalian Commodity Exchange DCIOcv1, for September delivery, dived as much as 7% to 796 yuan ($118.45) a tonne. They ended down 5.8% to 807 yuan per tonne.
Coking coal futures on the Dalian bourse DJMcv1 slumped 4.5% to 2,652 yuan a tonne, after the state planner pledged stronger supervision to stabilise prices, and coke DCJcv1 fell 3.9% to 3,395 yuan per tonne.
The plunge in raw materials had also pressured steel prices on the Shanghai Futures Exchange.
Construction material rebar SRBcv1, for October delivery, slipped 3.7% to 4,654 yuan a tonne. Hot-rolled coils SHHCcv1 also declined 3.7% to 4,748 yuan per tonne.
“Despite positive signal from the Politburo meeting, current downstream demand is still largely affected by the pandemic,” analysts with SinoSteel wrote in a note, adding that steel inventories increased while apparent consumption was sluggish.
Shanghai stainless steel futures SHSScv1, for June delivery, rose 1.2% to 19,320 yuan a tonne.
