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Dalian iron ore retreated on Tuesday from a two-month high while other steelmaking inputs also pulled back, as top steel producer China stepped up COVID-19 restrictions to contain a fresh wave of outbreaks ahead of a crucial Communist Party congress.
Coking coal, which initially shrugged off weakness in the broader ferrous market, surrendered gains. But losses were capped by lingering concerns about tightening supply.
The most-traded January iron ore on China’s Dalian Commodity Exchange ended daytime trade 2.5% lower at 721 yuan ($100.29) a tonne, after five straight sessions of gains.
Benchmark November iron ore on the Singapore Exchange was down 2.6% at $94.45 a tonne by 0706 GMT.
Traders were expected to remain in a wait-and-see mode, watching out for policy changes involving China’s stringent COVID-19 curbs from the congress that begins on Oct. 16.
In the spot market, benchmark 62%-grade iron ore bound for China has remained largely stable this month below $100 a tonne, SteelHome consultancy data showed, after a 21% drop in the third quarter.
“If the real estate crisis and decisions over COVID measures cannot be resolved, at least partially, China could face a tough year ahead, especially in manufacturing”, with external demand also possibly weaker in 2023, said ING Greater China chief economist Iris Pang.
Dalian coking coal slipped 0.5%, after touching its highest in more than three months in morning trade. Coke dropped 2.1%.
Coal companies in Shanxi, China’s top coal producing province, plan to suspend production ahead of the Communist Party congress, traders said.
“The supply side of coking coal will tighten again, which will provide strong support for coal prices,” Huatai Futures analysts said in a note.
Steel prices also fell, with rebar on the Shanghai Futures Exchange down 2.4% and hot-rolled coil shedding 2.8%. Stainless steel dropped 1%.