Iron ore price extends decline on China lockdown fears

The iron ore price fell on Monday as fresh covid-19 outbreaks in China revived fears of lockdowns, dampening demand in the world’s top steel producer.

Benchmark 62% Fe fines imported into Northern China fell 3.77% Monday morning, to $135.87 per tonne.

The most-traded September iron ore contract on China’s Dalian Commodity Exchange ended daytime trading 1.9% lower at 903.50 yuan ($134.17) a tonne, after earlier touching a two-week low of 886 yuan.

Beijing raced to contain a “ferocious” outbreak, with millions facing mandatory testing and thousands under targeted lockdowns, after the capital city recently relaxed curbs.

A mass testing was also announced in the Shanghai commercial hub, following a recent two-month lockdown, while an outbreak was detected in Inner Mongolia, a major producer of metallurgical coal that is also used in steel production.

Recent lockdowns in China, which has a zero-covid policy, have sharply slowed economic activity, adding to a grim global outlook amid the fallout from the war in Ukraine and a worldwide monetary policy tightening to curb inflation.

“Fresh lockdowns and mass testing in Beijing, Shanghai, and now Inner Mongolia – the new epicentre of China’s covid outbreak – is the realization of the ferrous market’s worst fears,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.

“There had been genuinely optimistic hope that Chinese authorities might refrain from reversing back into economically crippling lockdowns, but that hope is now crumbling before us,” Widnell said.

(With files from Reuters)