Iron ore futures dip on caution ahead of Fed rate action

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Ferrous futures in top steel producer and exporter China fell on Wednesday, with iron ore hitting a two-week low, as caution prevailed ahead of a widely expected interest rate hike from the U.S. Federal Reserve.

The most-traded January iron ore on China’s Dalian Commodity Exchange ended daytime trade 0.9% lower at 703.50 yuan ($99.79) a tonne, after reaching its weakest since Sept. 8 at 686.50 yuan earlier in the session.

On the Singapore Exchange, the steelmaking ingredient’s benchmark October contract was down 0.7% at $95.45 a tonne, as of 0719 GMT.

Financial markets were on edge amid worries that increased monetary policy tightening by central banks could tip the world into a recession and dampen demand for commodities.

The Fed is widely expected to hike rates further by 75 basis points later in the day to tackle high inflation.

“If the interest rate is raised by 100 basis points, it will be bad for financial markets,” Zhongzhou Futures analysts said in a note.

“Although the recent replenishment of raw materials by steel mills has led to strong cost support, the macroeconomic environment at home and abroad is still not optimistic,” Huatai Futures analysts said separately.

The Asian Development Bank cut its 2022 and 2023 growth forecasts for developing Asia, citing mounting risks from rising borrowing costs across the world, the war in Ukraine and COVID-19 lockdowns in China.

The lender expects China’s economy to expand 3.3% this year, a further step down after previously trimming the forecast to 4.0% from 5.0% in April, taking into account the risks from the country’s zero-COVID policy and ailing property sector.

Rebar and hot-rolled coil on the Shanghai Futures Exchange both fell 0.7%. Stainless steel, however, gained 1.4%.

Dalian coking coal DJMcv1 edged up 0.6% and coke climbed 0.7%, rebounding from early losses.

Source: Reuters

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