Iron ore futures rebounded on Monday after last week’s selloffs, as traders bet the bottom has been reached despite lingering concerns about intensified covid-19 restrictions in top steel producer China.
On Friday, Dalian iron ore hit a five-week low of 652 yuan a tonne, while SGX iron ore slumped to a contract low of $92.75 a tonne amid mounting worries about demand as fresh covid-19 outbreaks prompted China to ramp up restrictions.
“Iron ore lacks short-term upward momentum, but the space below is also limited,” Zhongzhou Futures analysts said in a note.
Currently, 33 cities are under partial or full lockdowns, affecting more than 65 million residents, according to an estimate by Chinese financial magazine Caixin.
A property sector downturn in China and widespread lockdowns ahead of the ruling Communist Party’s once-every-five-years Congress starting on Oct. 16 are widely expected to dull domestic demand for iron ore and steel during the September-October peak construction season.
Offering some relief, a spokesperson for China’s central bank said on Friday there was room to adjust monetary policy as stimulus measures have been restrained while consumer inflation remains under control.
But for as long as China’s strict zero-covid policy exists, “any stimulus measures are unlikely to gain traction amid a challenging time for the Chinese property market and the economy in general,” said National Australia Bank economist Tapas Strickland.
Rebar contract on the Shanghai Futures Exchange rose 1.9%, while hot-rolled coil advanced 1.5%. Stainless steel gained 2%.
Other steelmaking inputs also rebounded, with Dalian coking coal up 3.1% and coke rising 2.4%.
(By Enrico Dela Cruz; Editing by Uttaresh.V and Rashmi Aich)