Ferrous futures in top steel producer and exporter China fell on Wednesday, with iron ore hitting a two-week low, as fears of a global recession dominated financial markets ahead of a widely expected interest rate hike from the US central bank.
The most-traded January iron ore on China’s Dalian Commodity Exchange slumped as much as 3.3 percent to 686.50 yuan ($97.44) a ton, its weakest since Sept. 8.
On the Singapore Exchange, the steelmaking ingredient’s benchmark October contract dropped 2.1 percent to $94.10 a ton, its lowest since Sept. 5.
Financial markets were on edge amid worries that increased monetary policy tightening by central banks could tip the world economy into recession, dampening demand for commodities and slowing global trade.
The US Federal Reserve 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 percent this year, a further step down after previously trimming the forecast to 4.0 percent from 5.0 percent in April, taking into account the risks from the country’s zero-COVID policy and ailing property sector.
Rebar on the Shanghai Futures Exchange fell 1 percent, while hot-rolled coil shed 1.1 percent. Stainless steel, however, gained 0.6 percent.
Dalian coking coal dropped 0.7 percent, while coke edged up 0.2 percent.
