Chinese iron ore futures fell Monday, as the country's
zero-Covid strategy threatened to derail a recovery in industrial activity
after fresh infections surfaced.
The most actively
traded September iron ore contract on the Dalian Commodity Exchange declined by
10% in early trading to 754.5 yuan ($112.33) a metric ton, its biggest one-day
drop since August.
Chinese authorities
said last week that Shanghai residents will need to be tested every week while
temporary lockdowns will be placed on residential complexes where Covid-19
cases are found, raising concerns that industrial activity will "remain
impacted for the foreseeable future," ANZ analysts said in a note.
Although lockdowns are
now easing, construction activity is slow to resume and manufacturing companies
are hesitating to reopen due to the fear of new Covid-19 infections, Fitch
Ratings analysts said in a note. "While the government is committed to stimulus
and monetary policy easing, there has not yet been a recovery in steel
demand," they said.
Weak demand for steel
is forcing mills to extend maintenance periods in areas such as the country's
steelmaking hub of Tangshan, the ANZ analysts said. Inventories of finished
steel products are also rising, they said.