Chinese iron ore futures ended flat after a volatile session on Wednesday, as hopes for an improvement in demand for the steelmaking raw material were offset by worries over the rapid global spread of the coronavirus.
Iron ore on the Dalian Commodity Exchange erased early gains to close unchanged at 653.50 yuan ($94.00) a tonne. Futures on the Singapore Exchange dropped 2.1% in afternoon trade.
“Prices remain driven by speculation as people are hoping that demand in China would pick up after the epidemic has been put under control, but I think it will still take some time,” a Shanghai-based trader said.
“Outside China, the situation is quite serious,” he said.
Market fundamentals are not very encouraging, the trader added, citing China’s huge inventory of steel products that is still piling up as downstream demand has yet to fully recover.
While economic activity is gradually resuming in China after being stalled for weeks by the epidemic, the construction sector may not return to normal operations until after two more months, he said.
Steel futures, however, closed higher as several places in China have lowered their emergency response level to the epidemic, and more followed suit after President Xi Jinping visited the epicentre of the outbreak on Tuesday.
Xi’s visit to the central Chinese city of Wuhan signalled his confidence that the victory over the coronavirus was within reach, said Tapas Strickland, director of economics at National Australia Bank in Sydney.
In contrast, Italy has imposed strict measures including a nationwide lockdown to contain the local epidemic, while the number of coronavirus cases has increased rapidly in the United States.
“COVID-19 headlines continue to be on the negative side. Markets accordingly are likely to remain volatile,” Strickland wrote in a note.
FUNDAMENTALS
* Mainland China, where more than 3,000 have died from the coronavirus, reported 24 new cases on Tuesday, up from 19 the day before, but 10 were people who had travelled from abroad.
* Construction steel rebar on the Shanghai Futures Exchange rose about 1% while hot-rolled coil climbed 0.1%, but stainless steel was down 0.1%.
* Coking coal slipped 0.2%, however, coke gained 0.3%.
* Industry benchmark 62% iron ore’s spot price rebounded after a two-day decline, settling at $90.80 a tonne on Tuesday, SteelHome consultancy data showed.
Source: Reuters
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