China, Singapore iron ore futures slip on easing supply concerns

[MANILA] Iron ore futures in Dalian and Singapore fell in early trade on Monday after data showed China's imports of the steelmaking raw material rose in August to a 19-month high, the latest evidence of a continued rebound from recent supply-side issues.

China's iron ore purchases last month totalled 94.85 million tonnes, up 4.2 per cent from 91.02 million tonnes in July, customs data showed, marking the highest level of imports since January 2018.

The most-traded iron ore on the Dalian Commodity Exchange, for delivery in January 2020, slumped as much as 3.6 per cent to 621 yuan a tonne. It was down 1.4 per cent by 0233 GMT.

On the Singapore Exchange, the front-month October contract dropped as much as 1.1 per cent to US$85.04 a tonne.

China's iron ore imports rebounded 21 per cent in July as shipments grew from big miners in Australia and Brazil, pushing inventory of imported iron ore at Chinese ports to 125.25 million tonnes by the end of August, according to data compiled by SteelHome consultancy.

Iron ore port stocks at the end of June hit the lowest since January 2017 amid disruptions in supply from Brazil and Australia, boosting spot prices to five-year peaks at a time steel mills' demand for the material remained robust.

"This (continued rebound in iron ore supply to China) seemed to suppress any bullishness from China's move to cut rates," ANZ Research said in a note. Steel futures rose, however.

China's central bank said on Friday it would cut the amount of cash that banks must hold as reserves for the third time this year, releasing 900 billion yuan (S$174.53 billion) in liquidity to shore up the flagging economy.

"We remain cautious about iron ore prices going into September in light of the still-uncertain trade outlook, the general malaise still plaguing large swathes of China's industrial economy and a steadily-improving supply picture, but we don't see as drastic a fall as what we saw in August," said Edward Meir, commodity consultant at brokerage INTL FCStone in London.

FUNDAMENTALS

Benchmark spot 62 per cent iron ore for delivery to China, stood at US$91 a tonne on Friday, according to data tracked by SteelHome consultancy.

The most-active construction steel rebar contract on the Shanghai Futures Exchange rose as much as 1.3 per cent to 3,463 yuan a tonne. Hot rolled coil, the steel used in cars and home appliances, jumped 1.9 per cent to 3,496 yuan.

Other steelmaking raw materials also advanced, with coking coal up 0.3 per cent at 1,333 yuan a tonne and coke gaining 1.3 per cent to 1,948 yuan.

REUTERS