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Iron ore futures in Singapore retreated on Monday after a four-session rally, while the steelmaking ingredient’s contracts on the Dalian Commodity Exchange stretched gains, even as China adhered to a strict COVID-containment approach.
Top steel producer China reported its highest number of new infections in six months on Sunday, a day after health officials said they were sticking with strict coronavirus curbs.
Iron ore rallied relentlessly last week despite Chinese authorities saying the nation should unwaveringly stick to the zero-COVID policy and denying knowledge of a rumoured plan for border reopening by next year.
Benchmark December iron ore on the Singapore Exchange was down 0.6% at $85.40 a tonne, as of 0703 GMT, after a weekly rise of more than 8%.
But the Dalian exchange’s most-traded January iron ore DCIOcv1 ended daytime trade 2.1% higher at 661.50 yuan ($91.51) a tonne, extending its rally to a fifth session.
Iron ore fundamentals remained weak amid domestic restrictions and expected steel production curbs during winter, even as some market participants bet that China will eventually pivot away from its zero-COVID policy.
And while China is sticking with the zero-COVID policy, authorities are seen making modest tweaks to managing the virus.
“In our view, the higher cumulative economic costs and constrained policy space will precipitate a gradual reopening next spring once vaccination preparation improves and hospital capacity is ramped up,” J.P.Morgan analysts said in a note.
Such growth-crippling costs of adhering to strict COVID rules were reflected in the latest Chinese trade data, with both exports and imports contracting simultaneously and unexpectedly in October.
Other Dalian steelmaking inputs also extended gains, with coking coal DJMcv1 and coke DCJcv1 up 2.9% and 2.8%, respectively.
Rebar on the Shanghai Futures Exchange SRBcv1 steadied, while both hot-rolled coil SHHCcv1 and wire rod SWRcv1 gained 0.1%. Stainless steel SHSScv1 shed 1.4%.