Futures for China’s steel products and ferrous raw materials rallied on Tuesday, with iron ore rising the most in seven months, as sentiment was lifted by data showing a decline in the number of new coronavirus cases.

While the death toll from the epidemic in China has climbed above 1,000, there were 2,097 new cases in the worst-hit Hubei province on Monday, down from 2,618 the previous day.

In the mainland, there were 2,478 new confirmed cases on Feb. 10, down from 3,062 on the previous day, bringing the total to 42,638.

The Dalian Commodity Exchange’s most-traded iron ore contract, with May expiry, ended up 4.4% at 605.50 yuan ($86.80) a tonne, its biggest one-day gain since early July.

On the Singapore Exchange, the front-month March contract jumped 4.6% to $83.47 a tonne in afternoon trade.

“I think it is a bit of a relief rally as China reported less new confirmed cases nationwide, sparking hopes that the spread of the coronavirus outbreak has been contained,” said Helen Lau, metals and mining analyst at Argonaut Securities in Hong Kong.

The benchmark Dalian contract has shed 12% from Feb. 3 up to Monday, after an extended Lunar New Year holiday, on concerns about demand prospects for the raw material in top steel producer China.

The epidemic could trim China’s economic growth rate by as much as 1 percentage point in 2020, according to Zeng Gang, the vice chair of Chinese government think tank National Institute for Finance and Development.

In China’s physical markets, however, demand for steel products and iron ore remained weak amid industry shutdowns and transport restrictions, according to Lau.

Some Chinese steel mills are reportedly planning to reduce output due to lack of workers in the wake of travel curbs to contain the outbreak.

“Steel demand will pick up eventually but the question is when,” Lau said.

President Xi Jinping has urged top officials to refrain from “more restrictive measures” to contain the outbreak as these could hurt the economy, sources told Reuters.

FUNDAMENTALS

* Benchmark spot 62% iron-content ore for delivery to China SH-CCN-IRNOR62 was steady at $83 a tonne on Monday, SteelHome consultancy data showed.

Construction steel rebar on the Shanghai Futures Exchange ended up 2.7%, hot-rolled steel coil advanced 2.2%, and stainless steel rose 0.9%.

Dalian coking coal added 3.2%, while coke climbed 3.1%.

Source:Reuters

The opinions expressed herein are the author's and not necessarily those of The OLO News.