Iron ore gets support

Instead of growing concern about the possibility of an economic downturn due to the rising number of COVID-19 infections and public anger over efforts to contain the outbreak.

Spot prices of 62% iron ore fell slightly on Monday and ended at $98.60 a tonne from the previous close of $99.25.

The small drop was in line with the December iron ore futures contract traded in Singapore.

However, iron ore contracts traded on the Dalian DCIOcv1 Commodity Exchange ended at 753.5 yuan ($104.65) a tonne on Monday, up 2% from the Nov. 25 close.

The slight decline in international spot iron ore prices and a modest increase in China's main domestic price probably indicate different perceptions among traders in those markets.

International traders may be a little more concerned about Beijing's continued adherence to strict zero COVID measures than domestic Chinese investors.

But the general message from the price action is that, at least for now, the number of COVID-19 infections is on the rise and the rare street protests against the administration's adherence to a no-no strategy. COVID is not enough reason to change the outlook positively for iron ore

Protests against Beijing's COVID-19 policies took place over the weekend in several cities, with analysts calling it the largest demonstration since the Tianan Square protests. The sport was held in 1989, which was violently suppressed by the government.

The impact of any ongoing protests could become more significant if they continue and escalate, or if they lead to even stricter COVID-19 measures, or easing. restrictions to appease public opinion.

Outside of the uncertainties caused by COVID-19, the picture looks brighter for iron ore, as China, the biggest buyer of steel, seems determined to revive the ailing real estate sector. of this country.

China's biggest commercial banks pledged to grant at least $162 billion in new credit to property developers last week, the latest move in a series of steps taken to revive confidence in the housing sector.

The question for the market is whether efforts to stimulate the housing and infrastructure sectors will be enough to boost steel demand, or whether a slowing global economy will cut demand from steelmakers. sectors such as manufacturing.

bullish signal

There are some other positives for iron ore, with China's port inventories below what was common at the same time last year, although they have increased in recent weeks.

Stockpiles of SH-TOT-IRONINV were 138 million tons in the seven days to November 25, up from 135.45 million tons last week, but lower than 150.9 million in the same week last year.

Iron ore inventories typically increase in the northern winter as steel mills stockpile stocks ahead of peak steel demand in the spring.

Iron ore inventories peaked at 160.95 million tonnes in February of this year, indicating a potential for further increases in the coming months.

To be sure, China's iron ore imports are likely to post relatively strong results in November, with Refinitiv estimating seaborne arrivals at 106.8 million tonnes, while commodities analysts Kpler predict a level lower but still strong is 99.13 million tons.

Official customs data for October has iron ore imports at 94.98 million tonnes, so it is likely that November's results will be stronger.

Ship tracking data and customs numbers are not completely consistent due to the difference in when goods are assessed as having arrived at port and cleared, but tracking data provides useful information on the direction of importation. can happen.

Spot iron ore prices spent most of the year between hopes that China's stimulus efforts would succeed and the fact that they have yet to.

This momentum is happening. However, while stimulus efforts are accelerating in size and scope, the market remains at risk from the COVID-19 situation.

Steel