The iron ore price headed for its biggest weekly drop since mid-February as China’s spreading virus restrictions and worsening property crisis prevented a recovery in demand.
The metal gained in Singapore on Friday but is down almost 8% this week.
China reported a slight increase in covid-19 cases, while officials denied the city will be locked down amid growing concern the capital’s response to its outbreak will intensify.
Dalian futures rose 3.4%, paring their weekly drop to 0.2%.
China has been trying to strengthen its economy hit by rolling out measures to help small firms, stabilize jobs and relax controls in the property market.
However, strict covid lockdowns are expected to “continue to weigh on industrial activity, resulting in weaker demand for metals,” ANZ Research said in a note.
Heavy rains in southern and southwest China weighed on short-term construction material demand, while falling raw material prices will no longer underpin steel prices, said Haitong Futures.
In the property market, Sunac China Holdings, the country’s fourth-largest developer, missed a bond payment this week. The latest default is spurring fears that there could be more to come, which would further weaken a sector that is vital for iron ore demand.
Iron ore has fallen around a quarter from this year’s peak in early March as the virus restrictions spread. The lockdowns are making it hard for the government to deploy infrastructure spending, and are occurring at a time of year when construction typically ramps up after winter.
“China’s virus-related restrictions are weakening the impact of support measures during the peak construction season and property indicators are down,” Australia & New Zealand Banking Group Ltd. analysts including Daniel Hynes said in a note. “Steel production could increase, though looming control measures are a downside risk.”
Still, demand is expected to improve in the medium-term as virus cases ease and Beijing implements policies to support growth, Huatai Futures said in a note.
Meanwhile, iron ore stockpiles across ports in China fell 2.5% from a week earlier on Friday, according to industry website Steelhome.
(With files from Reuters and Bloomberg)