Column: Iron ore shrugs off China covid woes, focuses on stimulus

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The iron ore market is choosing to focus on China’s efforts to stimulate its property sector, rather than on rising concerns over the potential economic fallout from surging covid-19 cases and public anger at efforts to contain outbreaks.

The spot price of benchmark 62% iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, dipped slightly on Monday to end at $98.60 a tonne from the previous close of $99.25.The small drop was matched by December iron ore futures traded in Singapore, which dropped to $98.14 a tonne from the close of $99.15 on Nov. 25.

International traders may be slightly more concerned by Beijing’s ongoing adherence to strict zero-covid measures than China’s domestic investors. The impact of any ongoing protests may become more important if they continue and escalate, or if they lead to either even stricter measures against covid-19, or an easing of restrictions in a bid to appease public opinion.

The question for the market is whether the efforts to stimulate the housing construction and infrastructure sectors will be enough to boost steel demand, or whether a slowing global economy will cut demand from areas such as manufacturing.There are some other positive signals for iron ore, with China’s port inventories below levels prevailing at the same time last year, even though they have been rising in recent weeks.

Iron ore inventories peaked at 160.95 million tonnes in February this year, suggesting there is scope for them to continue building in the coming months.

 

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