China iron ore futures drop on worries over local Omicron variant cases

Benchmark iron ore futures in China fell more than 2per cent on Monday, hit by concerns of production and transportation disruptions, after the country reported cases of the Omicron variant of the coronavirus over the weekend.

The northern coastal city of Tianjin has tightened exit controls after detecting local Omicron cases. The central Henan province also reported two local Omicron cases on the same transmission chain.

"The Tianjin outbreak over the weekend may provide some immediate downside shocks to prices should infection rates escalate and additional lockdown be imposed," said Atilla Widnell, managing director at Navigate Commodities, Singapore.

The most traded iron ore futures on the Dalian Commodity Exchange, for May delivery, dropped 2.2per cent to 698 yuan ($109.52) per tonne as of 0256 GMT.

Spot prices of iron ore with 62per cent iron content for delivery to China, meanwhile, increased $1 to $128.5 per tonne on Friday, according to SteelHome consultancy. "Looking further forward, the market looks well supported by sentiment around a post-Beijing Winter Olympics, partial stimulus-fuelled steel demand recovery," Atilla added.

Dalian coking coal futures sat tight at 2,266 yuan a tonne and coke prices inched 0.2per cent higher to 3,148 yuan per tonne.

Steel prices on the Shanghai Futures Exchange were mixed.

Construction used steel rebar dipped 0.04per cent to 4,486 yuan per tonne and hot rolled coils, used in the manufacturing sector, slipped 0.4per cent to 4,625 yuan a tonne.

Shanghai stainless steel futures, for February delivery, jumped 2per cent to 17,175 yuan per tonne.

($1 = 6.3735 Chinese yuan renminbi)