June 27, 2019 / 8:06 AM / 4 months ago

UPDATE 1-China iron ore resumes record-breaking rally on tight supply

* Dalian iron ore surges as much as 5.4%

* Shanghai rebar hits highest since Feb 2011

* Hot-rolled coil hits new peak, but ends down (Updates with closing prices, graphic)

By Enrico Dela Cruz

MANILA, June 27 (Reuters) - Dalian iron ore prices surged to a record on Thursday, snapping a three-day decline on renewed concerns about tightening supply of the raw material, while steel rebar futures extended their rally amid output cuts intended to curb pollution in China.

The most-active September iron ore contract on the Dalian Commodity Exchange jumped as much as 5.4% to an all-time high 838.5 yuan ($121.93) a tonne, exceeding the previous 837 yuan-a-tonne record touched on June 20. It closed 3.3% higher at 821.5 yuan.

Market participants were mainly focused on the dwindling stockpiles at Chinese ports SH-TOT-IRONINV, which are at their lowest since the start of 2017, said a trader at Itochu (China) Holding Co Ltd in Beijing.

Worries over tightness, which lifted spot iron ore prices to five-year highs last week, eased earlier this week after Brazilian miner Vale SA resumed full operations at its Brucutu mine, according to analysts.

Vale, the world’s No. 1 iron ore producer, had suspended some mining operations in Brazil for safety checks following a deadly tailings dam burst in January, curbing supply to top steel producer China.

“While the Brucutu restart will help boost supply, shipping the additional volumes from Brazil to China could take about 45 to 60 days,” the Itochu trader said.

Operational issues facing Australian iron ore producers are also adding to worries about supply, the trader said.

Rio Tinto Ltd , for instance, has lowered its guidance on iron ore volumes it expects to ship from the key Pilbara region in Australia for the third time since April, citing operational problems.

“We expect (spot) iron ore prices by end of the year to remain much higher than last year’s average of $70 per tonne,” the Itochu trader said.

The price of spot 62% iron ore grade for delivery to China SH-CCN-IRNOR62 was at $116.50 a tonne as of Wednesday, holding near five-year highs, data from SteelHome consultancy showed.

Higher steel prices, underpinned by output curbs in China’s top steelmaking city of Tangshan and elsewhere, where industrial gas emissions have been found to be persistently high, also provided a boost to iron ore.

The most-active October steel rebar contract on the Shanghai Futures Exchange closed up 0.4% at 4,001 yuan a tonne, after hitting 4,095 yuan earlier in the day, its highest since February 2011.

Hot rolled coil closed down 0.5% lower at 3,897 yuan a tonne, after a six-day advance and hitting an all-time high of 3,998 yuan earlier in the session.

Other steelmaking raw materials ended lower, erasing earlier gains. Dalian coking coal was down 0.6% at 1,375 yuan a tonne, while coke futures slipped 2.3% to 2,054.5 yuan.

($1 = 6.8768 yuan)

Reporting by Enrico dela Cruz; Editing by Tom Hogue

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