Dalian and Singapore
iron ore futures rebounded on Wednesday after data showed China’s exports grew
at a faster-than-expected pace in June, rekindling hopes of a rebound in demand
for the steelmaking raw material.
The most-traded iron
ore, for September delivery, on China’s Dalian Commodity Exchange (DCIOcv1)
ended daytime trade 1.5% higher at 732 yuan a tonne, after earlier falling 3.9%
to its weakest since Feb. 28.
On the Singapore
Exchange, iron ore’s front-month August contract (SZZFQ2) climbed 3.9% to
$109.10 a tonne, after touching its lowest level this year on Tuesday at
$104.10 a tonne.
Chinese exports grew
at their fastest pace in five months in June, adding to evidence that the
world’s biggest steel producer and iron ore consumer is slowly recovering from
the damage of pandemic restrictions.
Also helping soothe
nerves, central bank officials said China will step up policy support for the
battered domestic economy and ensure a favourable environment for recovery.
But persistent
worries about weak steel demand in China dragged lower steel futures in
Shanghai and other Dalian steelmaking raw materials, suggesting that iron ore’s
rebound may just be a blip.
Construction steel
rebar on the Shanghai Futures Exchange (SRBcv1) fell 2.1%, while hot-rolled
coil (SHHCcv1) dropped 2.3%. Stainless steel (SHSScv1) rose 1%.
Dalian coking coal
(DJMcv1) shed 1.7%, while coke (DCJcv1) lost 1.9%.
China imported 88.97
million tonnes of iron ore last month, easing by a modest 0.5% from 89.42
million tonnes in June 2021 amid weak demand from local steelmakers.
COVID-19
restrictions and bad weather in China may make it more difficult for steel
mills to recover from depressed margins and restart idled blast furnaces.
“(China’s) zero-COVID
strategy is raising concerns that even the huge fiscal stimulus package the
government is preparing will have little impact on demand for steel and iron
ore amid the ongoing restrictions,” said Daniel Hynes, ANZ senior commodity
strategist.