(Bloomberg) -- Iron ore headed for its biggest weekly drop since mid-February as China’s spreading virus restrictions and worsening property crisis prevented a recovery in demand.
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The steel-making ingredient gained in Singapore on Friday but is down almost 8% this week. Beijing reported a slight increase in Covid-19 cases, while officials denied the city will be locked down amid growing concern the capital’s response to its outbreak will be intensified.
In the property market, Sunac China Holdings Ltd., the country’s fourth-largest developer, missed a dollar bond payment this week. The latest default is spurring fears that there could be more to come, which would further weaken a sector that’s important for iron ore demand.
Iron ore has fallen around a quarter from this year’s peak in early March as the virus restrictions spread. The lockdowns are making it hard for the government to deploy infrastructure spending, and are occurring at a time of year when construction typically ramps up after winter.
“China’s virus-related restrictions are weakening the impact of support measures during the peak construction season and property indicators are down,” Australia & New Zealand Banking Group Ltd. analysts including Daniel Hynes said in a note. “Steel production could increase, though looming control measures are a downside risk.”
Still, demand is expected to improve in the medium-term as virus cases ease and Beijing implements policies to support growth, Huatai Futures said in a note. Meanwhile, iron ore stockpiles across ports in China fell 2.5% from a week earlier on Friday, according to industry website Steelhome.
Iron ore rose 1.4% to $127.30 a ton as of 3:36 p.m. in Singapore and is down 7.7% this week. Futures in Dalian rose 3.4%, paring their weekly drop to 0.2%. Steel rebar and hot-rolled coil advanced in Shanghai.
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