China iron ore futures hit 10-week low on easing of supply concerns

Manila

IRON ORE futures in China fell for a fourth straight session on Tuesday as supply concerns ebbed, while stepped-up production curbs in top steelmaking city of Tangshan added more pressure.

The most-traded January 2020 iron ore contract on the Dalian Commodity Exchange ended down 2.2 per cent at the session's lowest at 609 yuan (S$120) a tonne, its weakest finish since June 11.

The most-active September 2019 iron ore contract on the Singapore Exchange was down 0.5 per cent at US$86.08 a tonne in late trade.

"The iron ore market is currently mainly driven by supply factors, such as rising export volumes from miners," a Shanghai-based trader said.

Top steel producer China's iron ore imports surged 21 per cent in July from the month before to their highest level since January, as supplies surged from miners in Australia and Brazil.

Reduced iron ore shipments after a deadly tailings dam collapse in Brazil in January and a cyclone in Australia, and China's ramped-up steel output, lifted spot prices of the raw material to a five-year peak in recent months.

Prices have pulled back but they remain well above 2018 levels.

"Despite the steel production restrictions in China, I think demand for iron ore, particularly for high-grade materials, is still at a healthy level," the trader said.

While the US-Sino trade dispute has dampened global economic growth, it has not yet affected Chinese demand for BHP Group's iron ore, chief executive Andrew Mackenzie said on Tuesday.

Under Tangshan's new anti-pollution measures, steelmaker HBIS Tangsteel is allowed to operate only one sintering plant over a four-day period from Aug 18. Huaxi Steel and Guoyi Special Steel can operate only two plants each, according to a report by Mysteel consultancy. All other Tangshan mills were asked to slash sintering operations by 50 per cent , compared with the 20-50 per cent reduction previously imposed for August, the report said. Mining giant BHP said average benchmark prices for steelmaking raw materials are likely to remain above long-run marginal cost, though lower in financial year 2020 versus 2019.

Seaborne iron ore supply conditions for the remainder of 2019 and next year are "highly uncertain, both in aggregate and in terms of quality profile", BHP said.

Benchmark spot 62 per cent iron ore for delivery to China rose on Monday to US$92.50 a tonne, from Friday's US$91.50, extending its rebound after slumping to the lowest in more than four months early last week.

China's demand for iron ore pellets and high-quality ore is expected to accelerate in 2020 as a result of Beijing's push to shift dozens of steel mills to coastal regions in its battle to stop smog blanketing industrial cities.

The most-active construction steel rebar contract on the Shanghai Futures Exchange edged down 0.8 per cent at 3,699 yuan a tonne.

Hot-rolled coil, steel used in cars and home appliances, dropped 0.5 per cent to 3,709 yuan a tonne.

Dalian coking coal edged up 0.1 per cent to 1,338 yuan a tonne, while coke ended steady at 1,985.50 yuan. REUTERS