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Iron ore leads ferrous rally as China eases COVID curbs

Iron ore climbed fresh one-week highs on Tuesday, as China easing some quarantine requirements for international arrivals and Beijing and Shanghai recording no new local COVID-19 cases sparked a broad-based rally in metals.

The steelmaking ingredient’s front-month July contract on the Singapore Exchange was up 4.1% at $124.80 a tonne, as of 0812 GMT, after hitting the highest since June 17 at $125.

On China’s Dalian Commodity Exchange, iron ore’s most-traded September contract ended daytime trade 6.3% higher at 809 yuan ($120.99) a tonne, after earlier hitting its highest since June 20 of 812 yuan.

China slashed the quarantine time for inbound travellers by half in a major easing of one of the world’s strictest COVID-19 curbs, which have deterred travel in and out of the country since 2020 and slowed economic activity.

Beijing and Shanghai reported no new local infections on Tuesday, the first time both cities were in the clear simultaneously since late February, after months of fighting their worst-ever outbreaks.

Prices of steel products and other steel inputs also rose.

Construction steel rebar on the Shanghai Futures Exchange SRBcv1 rose 2.5%, while hot-rolled coil SHHCcv1 gained 2.1%. Stainless steel SHSScv1 edged up 0.3%.

Dalian coking coal DJMcv1 climbed 7.7% and coke DCJcv1 advanced 5.6%.

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

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

China’s resolve to limit steel output this year at below 2021 production to curb emissions is also a drag on demand for iron ore.

“The pressure to reduce crude steel production will curb the demand for raw materials,” Zhongzhou Futures analysts said in a note. “The rebound is limited.”

Source: Reuters

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