Benchmark iron ore prices in Asia fell on Monday on growing fears of weakening demand for the raw material in top steel producer China, where multiple cities are enforcing fresh COVID-19 curbs.
The most-traded iron ore, for September delivery, on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trade 3.3% lower at 741 yuan ($110.37) a tonne, after earlier touching 722 yuan, its lowest since July 6.
On the Singapore Exchange, the steelmaking ingredient’s front-month August contract SZZFQ2 slumped up to 4.8% to $107.45 a tonne.
“Relentlessly negative COVID headlines out of Gansu, Guangdong, Henan, Macau, Shanghai and Zhejiang over the weekend will pour ice-cold water over sentiment from Monday onwards,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.
Local governments in China, which are maintaining a dynamic zero-COVID policy, are adopting fresh curbs – from business halts to lockdowns – to rein in new infections, with the commercial hub of Shanghai bracing for another mass testing.
Increased iron ore shipments to China from top suppliers Australia and Brazil are also adding to the negative mood, he said.
That could push portside inventory of imported material higher, after rising for a second consecutive week to 128.3 million tonnes as of July 8, based on SteelHome consultancy data SH-TOT-IRONINV.
Demand for iron ore, meanwhile, is expected to remain weak as Chinese steel mills scale back output while nursing losses from high inventories and sluggish steel orders.
Over July 1-7, the blast furnace capacity utilisation rate among China’s 247 steel mills regularly surveyed by Mysteel consultancy had dipped for a third week by another 1.9 percentage points on week to 85.71%.
Construction steel rebar on the Shanghai Futures Exchange SRBcv1 tumbled 4.1%, hot-rolled coil SHHCcv1 dropped 4% and stainless steel SHSScv1 shed 1.3%.
Dalian coking coal DJMcv1 slumped 3.4% and coke DCJcv1 tumbled 4.5%.
