Steel futures and prices of steelmaking ingredients in China tumbled on Monday as surging local COVID-19 cases prompted traders to book some profit from a recent rally spurred by the easing of coronavirus restrictions.
Top steel producer China is in the first of an expected three waves of COVID-19 cases this winter, according to the country’s chief epidemiologist, forcing many people to stay home.
The most-traded iron ore for May delivery on China’s Dalian Commodity Exchange ended daytime trade 3.7% lower at 793.50 yuan ($113.75) a tonne.
On the Singapore Exchange, the steelmaking ingredient’s benchmark January contract was down 3.1% at $107.85 a tonne, as of 0700 GMT.
China’s COVID-19 surge “might provoke an increasing proportion of the nervous population to wait out the current wave at home, destroying economic activity in the process”, Navigate Commodities Managing Director Atilla Widnell said.
The market pullback was broad-based even as Beijing, in a statement on Friday following an agenda-setting meeting, pledged to focus on stabilising its $17-trillion economy in 2023 and step up policy adjustments to ensure key targets are hit.
COVID-19 has also hit trading floors in Beijing and was spreading fast in the financial hub of Shanghai.
Rebar on the Shanghai Futures Exchange fell 3.4%, hot-rolled coil dipped 3.6%, wire rod shed 3.5%, and stainless steel tumbled 4.8%.
Dalian coking coal DJMcv1 slumped 6.4% and Dalian coke sank 6.8%.
Market fundamentals were also distressing.
Average daily crude steel production among member mills of China Iron & Steel Association (CISA) eased over Dec. 1-10 after rising during the prior two 10-day periods, down by 2.1% or 41,800 tonnes from late November to 1.99 million tonnes, Mysteel consultancy reported, citing CISA data.
Several steel producers have cut production while nursing losses and anticipating weaker demand during winter, Mysteel said.
