Iron ore slides ahead of key China data as outbreaks continue

Shares in Andrew Forrest’s Fortescue Metals Group have copped a beating amid an Australian market rout and further falls in the iron ore price.

The steelmaking ingredient is heading for a fourth-straight decline, reversing gains made earlier this month when it posted its longest stretch of consecutive positive days this year.

The news only compounded a selloff in Fortescue as the ASX faces one of its worst days in more than two years after Wall Street in the US headed into bear market territory overnight.

The miner’s stock regained some ground after earlier falling by more than 9 per cent but was still down 8.8 per cent to $19.55 at 12.20pm.

The iron ore price was lower again ahead of Wednesday’s economic data from China, as outbreaks in some of the nation’s key cities remain a drag on demand.

Investors hopeful of a smooth demand recovery post-lockdowns are now factoring in fresh COVID-19 outbreaks again halting business operations in China. The wary market took to selling down futures as Shanghai reported 17 local COVID infections and Beijing 74, a three-week high for the capital.

With fitful reopenings from lockdowns and still no end to virus restrictions in sight, traders are looking for signs of the strength and momentum of the government’s commitments to boost the construction industry, a major consumer of steel products. Top-down stimulus remains a key imperative, with authorities reported to be visiting various provinces to urge efficient and speedy policy implementation, according to the Global Times.

Still, most research reports remain fairly optimistic about the longer-term outlook for iron ore, despite “headwinds from Shanghai’s partial return to lockdown”, according to analysts in an emailed Morgan Stanley report headed by Marius Van Straaten. It’s projecting a deficit market on a full-year basis, and “a robust recovery in China’s steel production on strong infrastructure spending should drive more price upside by” the third quarter.

Meanwhile, Australian miners suffered the heaviest losses among Asian resources stocks, amid concerns over US inflation and weaker demand in China.

Iron ore declined 1.1 per cent to $US133.15 a tonne on Tuesday morning. Futures in Dalian were down 1.4 per cent, while steel rebar and hot-rolled coil fell in Shanghai.

Bloomberg