Iron ore and steel futures slump as demand expectations are weighed by Shanghai’s extended lockdown and fears that other parts of China, including Beijing, may be subject to similarly harsh curbs.
The most-traded September iron ore contract on the Dalian Commodity Exchange fell as much as 11% on Monday. They were recently 8.4% lower at 815.0 yuan ($125.35) a metric ton. Iron ore futures in Singapore also declined by as much as 11% in response to the negative sentiment and were recently 6.2% lower at $141.40 a ton.
The most actively traded October steel rebar futures contract on the Shanghai Futures Exchange fell 3.2% to CNY4,857 a ton.
“Intensifying risks presented in rising virus infections [are driving] a need to stay cautious,” said IG market strategist Yeap Jun Rong.
China has ordered mandatory Covid-19 tests in Beijing’s Chaoyang district amid a rise in cases and placed movement restrictions on other communities and areas in the district, state-run newspaper Beijing Daily reported Sunday.
“The outlook appears precarious in the near term, as more cases are expected to show up in the coming days and the impact to economic conditions may seem more prolonged. That is sufficient to drive some sell-off in the iron ore market on demand concerns,” Mr. Yeap said.
Still, a “pocket of optimism may come from rising infrastructure projects to soften the country’s economic slowdown but market participants may prefer to take some risks off while awaiting greater clarity on how the virus situation will turn out,” he said.