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The iron ore price surged on Thursday, buoyed by growing hopes of improved demand in China after reports of a possible easing of covid-19 curbs in the world’s top steel producer.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $153.33 a tonne during morning trading, up 5.8% compared to Wednesday’s closing.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange ended daytime trading 6.8% higher at 797.50 yuan ($126.27) a tonne, after soaring as much as 9.7% to its highest since February 11.

“The whole China ferrous futures complex is reacting zealously to reports that the country is contemplating exiting its ‘zero-tolerance’ stance towards covid-19, for which the ‘stop/start’ impact on the economy has been a heavy burden,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.

“Fewer intermittent lockdowns will support China’s pursuit to getting the economy back on track.”

But it is still too early for China to consider easing its stringent coronavirus restrictions, with the highly infectious omicron strain still capable of causing large numbers of deaths, said the head of an expert group on covid-19 prevention. 

China plans to raise its equity output of iron ore in overseas mines to 220 million tonnes by 2025 as well as increase domestic raw material supplies, state-backed China Metallurgical News reported on Tuesday.

China aims to “fundamentally” solve the shortage issue in steelmaking ingredients over 10-15 years, Luo Tiejun, the vice-chairman of the China Iron and Steel Association, was quoted, citing what he called a “cornerstone plan”.

The plan, which the steel body said in January it had submitted to the state planner, industry ministry, natural resources ministry and environmental regulator, was designed to secure steel resources in the medium-to long-term.

It proposes raising China’s share of overseas iron ore production from 120 million tonnes in 2020 to 220 million tonnes by 2025, according to Luo. The cornerstone plan also aims to boost domestic iron ore output by 100 million tonnes to 370 million tonnes and steel scrap consumption by 70 million tonnes to 300 million tonnes over the same period.

(With files from Reuters)