Iron Ore Slides Toward Lowest Since 2021 As Xi Dents Covid Hopes

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(Bloomberg) -- Iron ore added to five weeks of declines after Chinese President Xi Jinping offered no immediate prospect of changes to policies that have ravaged steel demand over the past year.

Opening the Communist Party’s pivotal congress in Beijing on Sunday, China’s leader reiterated his zero-tolerance approach to the epidemic, denting optimism for an imminent roll-back of stringent rules to quash outbreaks. There was also little new on the crisis-wracked property sector.

Demand remains weak, according to Chen Wenguang, research director at Lange Steel Information Research Center. That’s been reflected by last week’s dive in spot steel prices, while the recent spread of Covid in the nation has further dampened traders’ confidence, he said.

A more relaxed stance on Covid would have been a “potential salvation” for commodities, Vivek Dhar, analyst at Commonwealth Bank of Australia (OTC:CMWAY), said in a note. Xi’s reiteration that development remains a top priority suggests that some easing of the flagship policy is possible next year if the economy deteriorates further, he added.

The steelmaking material is trading close to its lowest point this year as a host of bearish factors threaten to subdue steel demand through the final quarter of 2022. The environment is still not optimistic and the industry faces a “severe market situation”, the China Iron & Steel Association warned last week.

An overall slowdown in steel output has become evident, with blast furnace rates in Tangshan, a major Chinese steel hub, falling for the first time in five weeks. China releases its latest batch of economic data on Tuesday, including third-quarter growth and property activity, as well as September’s steel output.

Iron ore dropped as much as 2.6% in Singapore and traded down 1.9% at $92.05 a ton as of 2:25 p.m. local time. A decline below $91.20 a ton would mark the lowest price since November 2021. 

Futures in Dalian plunged 2%, while steel rebar and hot-rolled coil futures in Shanghai also retreated.