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Iron ore price retreats as China’s zero-covid policy clouds demand

Steel factory in China. Stock Image.

The iron ore price retreated on Friday as China indicated controlling covid-19 outbreaks is still a priority.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $115 a tonne Friday morning, down 3.5%.

On China’s Dalian Commodity Exchange, September iron ore ended daytime trade 1.8% higher at 782 yuan ($116.11) a tonne, off Thursday’s four-week peak of 798.50 yuan.

“It appears to us that any change in the zero-covid policy will only happen when authorities are convinced that mutations are less virulent and vaccines/medicines are proven to be more effective. Both are unlikely to happen in the near term,” ANZ analysts said in a note.

Investors had been optimistic that more aid was on its way to revive construction projects stalled by a wave of repayment boycotts from homebuyers, but none was forthcoming during a key Politburo meeting. 

Unlike during the April meeting, where leaders spoke about “supporting local governments to improve real-estate policies,” Thursday’s meeting spoke of a broader directive to “stabilize the property market,” without specifically mentioning more supportive measures. Party leaders also delivered a generally downbeat assessment of economic growth prospects.

“There’s no clear message that the central government will coordinate any property sector rescue, which is a bit disappointing,” Australia & New Zealand Banking Group Ltd. analysts, including senior economist Betty Wang said in a note. 

Iron ore rebounded this week, with the benchmark 62%-grade material gaining about 15% in the spot market as of Thursday.

(With files from Bloomberg and Reuters)