Iron ore price drops as covid-19 outbreaks in China dim growth outlook

The iron ore price fell on Tuesday as surging covid-19 infections in the world’s biggest steel producer and metals consumer fanned worries over the country’s economic growth prospects.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $136.19 a tonne on Tuesday, down 5.2% compared to Monday’s closing.

“China’s covid-19 outbreak will undoubtedly impact national steel demand, whether the easing of ‘zero tolerance’ permits infections to grow or the government imposes sweeping lockdowns,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.

“Therefore, we view the market as having peaked for the time being until this outbreak runs its course and stimulus trickles through to real demand in the second half,” he said in a note.

China has reported more local symptomatic covid-19 cases so far this year than it recorded in all of 2021, as the highly transmissible omicron variant triggers outbreaks from Shanghai to Shenzhen.

A resurgent coronavirus, sluggish domestic real estate market and geopolitical tensions may prompt China to further ease monetary policy, despite a widely anticipated interest rate hike by the U.S. Federal Reserve later this week.