* Iron ore touches 589 yuan/tonne ‘limit-up’, steel edges up
* Vale to cut output, shut down dams after Brazil disaster
* Disaster could prompt tighter regulations globally-analyst
* Iron ore price could hit $120/tonne by August - analyst (Updates with closing prices, more details and comments)
By Enrico Dela Cruz
MANILA, Jan 30 (Reuters) - Chinese iron ore futures rose sharply to their highest level in nearly 17 months on Wednesday, after Brazil’s Vale SA said it was cutting output as it moved to shut down more dams similar to the one that collapsed last week.
The world’s largest iron ore miner said it would take as much as 10 percent of its ore output offline in order to decommission 10 more dams, after one of its tailings dams burst on Friday, destroying facilities and killing scores of people.
The most traded iron ore on the Dalian Commodity Exchange ended at 587 yuan ($87.42) a tonne, up 5.6 percent, after hitting the daily upside limit of 589 yuan a tonne earlier in the session, the highest since early September 2017.
The disaster has created uncertainty for the iron ore market in China, the world’s biggest importer of the commodity, traders say.
Vale is the world’s top supplier of low-aluminium iron ore, preferred for its low impurity level by Chinese steel mills seeking to comply with pollution reduction targets as part of the country’s anti-smog campaign.
“Bulk commodity markets remained on edge as supply-side issues dominated discussions,” ANZ Research said in a note.
Taking into account Vale’s output reduction, Singapore-based steel and iron ore data analytics company Tivlon Technologies predicts iron ore prices will hit $120 a tonne by August, from the projected $95 a tonne by May.
The Brazil disaster could also lead to tougher industry regulations elsewhere to ensure safety, such as in Australia, which could slow down or even further reduce global output, said Tivlon data scientist Darren Toh.
“Iron ore miners all over the world have been busy ramping up their production over the last five years,” he said. “Regulators will want to start taking a closer examination of all mining facilities to prevent accidents.”
Vale said its mining operations that would be halted currently produce 40 million tonnes of iron ore and 11 million tonnes of pellets per year. Operations will resume after the dam decommissioning, to be completed over the next three years, it said.
The most-active rebar contract on the Shanghai Futures Exchange was nearly flat at 3,677 yuan a tonne, ending just 0.1 percent higher after rising as much as 2.6 percent earlier in the session. Hot rolled coil also inched up 0.1 percent to close at 3,582 yuan.
Dalian coking coal ended down 0.7 percent at 1,204 yuan a tonne, erasing gains earlier in the session. Coke slipped 0.4 percent to 2,020 yuan.
$1 = 6.7144 yuan Reporting by Enrico dela Cruz; editing by Richard Pullin and Rashmi Aich