Iron ore price down despite China’s move to ease covid curbs

Iron ore price

While covid-19 concerns may be fading away and China has reiterated its promise to continue rolling out policy support for its struggling economy, a sustainable rally for the country’s ferrous complex remains uncertain.

Beijing is ruling out flood-like stimulus and has not indicated specific measures and a timeframe for any action.

“The medium to long-term outlook is more bearish,” said strategists at ING.

“While we expect iron ore prices to be supported in 2H22 due to expectations of a recovery in China, the longer-term outlook for iron ore is more bearish. On the demand side, it appears that China will continue to cap crude steel output whilst also looking to replace older steel capacity with electric arc furnace capacity in order to help the country meet its decarbonisation goals. We have already seen China’s iron ore imports peak in 2020.”

“Even if China recovers in the second half, it won’t be able to single-handedly boost prices back to new highs — that age has gone,” Amelia Xiao Fu, head of commodities strategy at BOCI Global Commodities, told Bloomberg.

“If other major economies are heading towards a recession, China won’t be growing at exceptional rates either.”

“Overall, it seems that the iron ore and steel markets had been trading on the expectation that Beijing would deliver rapid and effective stimulus, especially in the second half of 2022,” wrote Reuters columnist Clyde Russell.

“While this may still happen, it appears market participants want to see actual demand rising, rather than officials talking about it.”

(With files from Reuters and Bloomberg)

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