Covid restrictions cause the biggest drop in iron ore prices since February

Iron ore prices fell to their lowest weekly level since February, as a combination of China’s increasing virus restrictions and worsening real estate crisis prevented a recovery.

Although the metal gained in Singapore last Friday, it is now down nearly 8% for the week.

China reported an increase in covid-19-related cases. However, officials deny that the city will be closed down as there is growing concerned about the capital’s response.

Futures in Dalian rose 3.4%, paring their weekly fall to 0.2%.

China is trying to boost its economy by implementing measures to stabilize small businesses, increase employment and loosen restrictions in the property market.

However, tight covid lockdowns will “continue to weigh upon the industrial activity, resulting in weaker demand for irons,” ANZ Research stated in a note.

Haitong Futures stated that heavy rains in the southwest and southern China have impacted short-term construction material demand. However, falling raw material prices won’t continue to support steel prices.

Sunac China Holdings missed its bond payment in the property market. It is the fourth-largest country developer. Fears of more defaults are increasing, which could further weaken an industry that is critical for iron ore demand.

The virus restrictions have caused iron ore prices to fall by around 25% from their peak in March. These lockdowns make it difficult for the government and other agencies to spend infrastructure funds. They also occur at a time when construction usually ramps up following winter.

“China’s virus restrictions are weakening support measures during peak construction season, and property indicators are falling,” Australia & New Zealand Banking Group Ltd. analysts Daniel Hynes stated in a note. Although steel production could rise, there are still control measures that can be taken to reduce the risk.

Huatai Futures stated in a note that demand will continue to rise as more people get sick and Beijing adopts policies to boost growth.

According to Steelhome the industry website, the iron ore stockpiles in China’s ports fell 2.5% on Friday, compared to a week before.

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