Iron ore prices wavered as the market assesses the
strength of Chinese demand.
Economic indicators suggest that government stimulus
is boosting the ailing construction industry, which should flow through to
stronger consumption for the steel-making material. Set against that, a snap
lockdown in the steel hub of Tangshan is a reminder that China’s Covid Zero
policies could suppress output and sap demand.
Iron ore in Singapore fell 0.7% to $96.40 a ton as of
3:52 p.m, having climbed as much as 2.1% earlier. Futures in Dalian closed 1.4%
lower, while steel rebar and hot-rolled coil contracts retreated in Shanghai.
Higher steel output and falling rebar inventories are
signaling that Beijing’s bid to stimulate construction after an almost yearlong
property rout are having a positive impact. Daily steel output edged up 3.3% in
the first 10 days of September compared with the end of August, while new
investments are fueling building activity.
Despite the news from Tangshan, the market remains
broadly optimistic that disruptions due to strict Covid-19 restrictions will be
modest during the autumn’s peak construction season. With China’s economic
recovery the main focus for authorities, the economic impact of lockdowns may
be lessening, said Chen Wenguang, a research director at Lange Steel
Information Research Center.
As blast furnaces continue to ramp up production,
mills will move to restock iron ore inventories ahead of the week-long National
Day holidays early next month, providing near-term support for prices, Haitong
Futures said in a note.
Operating rates at blast furnaces have trekked higher
and are close to their peak for the year. Investor focus is now turning to the
National Party Congress that starts Oct. 16, where new infrastructure funding
or housing-loan policies may be announced, which could further aid sentiment