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Iron ore set for weekly fall on renewed China lockdown worries

Iron ore set for weekly fall on renewed China lockdown worries

reuters.com · 06/09/2022 23:43
Iron ore set for weekly fall on renewed China lockdown worries

Dalian iron ore drops as much as 2.2%

SGX iron ore slumps below $140/tonne

Mass COVID-19 testing set in Shanghai

By Enrico Dela Cruz

- Iron ore prices fell in morning trade on Friday and headed for weekly losses on renewed concerns over demand in China, where fresh COVID-19 alerts threaten to derail the economy's reopening and steel margins have come under pressure.

China's commercial hub of Shanghai faces an unexpected round of mass COVID testing this weekend, following the discovery of a few cases in the community, just 10 days after a city-wide lockdown that hurt businesses was lifted. nL8N2XW66L

Lockdowns in China, which has a tough zero-COVID policy, have battered the world's second-largest economy and biggest steel producer.

"China remains a big source of uncertainty for global growth," J.P.Morgan analysts said in a note. The economy's reopening, which has led to a surge in China's exports in May, "also raises the risk that cases re-emerge".

The most-traded September iron ore contract on China's Dalian Commodity Exchange DCIOcv1 fell as much as 2.2% to 910 yuan ($136.04) a tonne, and was on track for its first weekly loss in four weeks.

On the Singapore Exchange, the steelmaking ingredient's most-active July contract SZZFN2 dropped by 3.1% to $137.35 a tonne.

However, spot iron ore in China traded higher this week, hitting a seven-week peak on Thursday at $148 a tonne, SteelHome consultancy data showed SH-CCN-IRNOR62, as short-term demand picked up.

China's iron ore imports rose 3% in May from a year earlier, data on Thursday showed, after disruptions to shipments by major suppliers eased. nL1N2XW0EO

The country ramped up its purchases - despite weak profits at steel mills - also because of the easing of COVID-related curbs and Beijing's stimulus support for the struggling economy.

Other ferrous materials were also under pressure, with Dalian coking coal DJMcv1 down 0.5% by 0255 GMT, while construction steel rebar on the Shanghai Futures Exchange SRBcv1 slipped 0.2%.

Dalian coke DCJcv1 rose 0.3%, while Shanghai hot-rolled coil SHHCcv1 edged up 0.1%. Shanghai stainless steel SHSScv1 lost 0.1%.

(Reporting by Enrico Dela Cruz in Manila; Editing by Shailesh Kuber)