The iron ore price fell on Monday, extending losses a day after Chinese President Xi Jinping reiterated the effectiveness of his zero-covid policy at the opening of the ruling Communist Party Congress.
Xi said China “achieved major positive results in the overall prevention and control of the epidemic.”
China’s zero-tolerance approach to covid-19 has caused supply chain disruptions, dampened demand and slowed China’s economy dramatically.
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $93.68 a tonne Thursday morning, down 1.94%.
The most-traded January iron ore on the Dalian Commodity Exchange ended daytime trade 2% lower at 686.50 yuan a tonne, after hitting its weakest since Sept. 8 at 680.50 yuan earlier in the session.
A more relaxed stance on covid would have been a “potential salvation” for commodities, Vivek Dhar, analyst at Commonwealth Bank of Australia, said in a note. Xi’s reiteration that development remains a top priority suggests that some easing of the flagship policy is possible next year if the economy deteriorates further, he added.
The environment is still not optimistic and the industry faces a “severe market situation”, the China Iron & Steel Association warned last week.
An overall slowdown in steel output has become evident, with blast furnace rates in Tangshan, a major Chinese steel hub, falling for the first time in five weeks.
China’s daily count of new coronavirus cases has doubled since September, hardening the resolve of authorities to quickly eliminate outbreaks.
“Any last embers of hope or sentiment that China might reverse out of this economic growth-suppressing strategy feel like they’ve now been well and truly stamped out,” said Navigate Commodities Managing Director Atilla Widnell.
(With files from Reuters and Bloomberg)