Iron ore futures slip as Vale gets nod to resume major mine ops

[MANILA] Iron ore futures in China, the world's top consumer of the steelmaking raw material, and in Singapore were lower in early trade on Monday after miner Vale SA got approval to resume activities at a major mine in Brazil.

Dalian Commodity Exchange's most-traded iron ore, for delivery in January 2020, slipped 1 per cent to 616.50 yuan (S$119) a tonne.

On the Singapore Exchange, the front-month December contract fell 1.5 per cent to US$80.52 a tonne.

Vale, the world's largest iron ore miner and China's main source of high-grade material, said on Friday it had been authorised by Brazilian regulator ANM to resume Alegria mine operations, which were interrupted last March after a "stress test" failed to guarantee its stability.

The company said the resumption of mining activities at Alegria will allow it to restore 8 million tonnes of 50 million in capacity lost after the collapse of its Brumadinho dam in January caused a series of shutdowns.

The mine's resumption will add up to 1 million tonnes to production volumes in 2019, but should not impact sales this year, it said.

Tight supply concerns in the aftermath of the Vale dam burst and dam shutdowns for safety checks, along with operational issues that also hit miners in Australia, had pushed iron ore prices up until July to five-year peaks.

Prices have since pulled back as supply has started normalising, with imported iron ore inventory at Chinese ports scaling a six-month high late last month.

Benchmark spot 62 per cent iron ore, which slumped to its lowest in more than seven months last week at US$85 a tonne, based on SteelHome consultancy data, may average US$90 this quarter and drop to US$70 next year, said Andrew Driscoll, head of resources research at CLSA.

"A recovery in supply from Brazil amidst limited demand growth should see the market better supplied and prices intersecting a lower point on the cost curve, relative to this year," he said.

FUNDEMENTALS

- Brazil's iron ore exports in October reached 31.2 million tonnes, compared with 27.14 million tonnes the month before.

- The most-traded construction steel rebar on the Shanghai Futures Exchange was up 0.4 per cent, as of 0239 GMT, while hot-rolled steel coil, used in cars and home appliances, rose 0.3 per cent.

- Shanghai stainless steel inched up 0.5 per cent.

- Dalian coking coal fell 1.6 per cent and Dalian coke edged down 0.4 per cent.

REUTERS