Iron ore futures surged on Friday as China eased some of its covid-19 rules, taking bold steps a day after the nation’s new top leadership body stressed the need to minimize the impact of containing outbreaks on the world’s second-biggest economy.
Price benchmarks for steel products and other steelmaking inputs in China, the world’s top steel producer, also stretched gains after authorities announced the measures.
The most-traded January iron ore on China’s Dalian Commodity Exchange ended daytime trade 5% higher at 708.50 yuan ($99.86) a tonne, after touching its highest since Oct. 12 at 720 yuan.
On the Singapore Exchange, the steelmaking ingredient’s benchmark December contract climbed up to 8.2% to $93.60 a tonne.
Sentiment was already upbeat before China announced the relaxed covid-19 curbs, despite a surge in new case numbers and the ruling Politburo Standing Committee reaffirming Beijing’s zero-covid policy.
The new rules, including shorter quarantine time for close contacts of cases and for inbound travellers, were among measures examined at Thursday’s committee meeting.
“Short-term emotional factors dominate the market trend,” Sinosteel Futures analysts said in a note, also citing hopes of a slowdown in the US Federal Reserve’s interest rate hikes, which lifted overall investor sentiment.
Dalian coking coal rose 3.7%, while Dalian coke advanced 4%.
On the Shanghai Futures Exchange, rebar rose 2.5%, hot-rolled coil gained 2.1%, while both wire rod and stainless steel climbed 3.3%.
This week’s gains in China’s ferrous complex, however, appeared lacking support from fundamentals.
Chinese appetite for iron ore is currently poor as steel mills have opted to reduce output while nursing losses from weak demand partly due to a property sector slump.
The usual winter steel production curbs are also looming in China, likely keeping iron ore demand subdued at least in the next four months.
(By Enrico Dela Cruz; Editing by Sherry Jacob-Phillips)