July 26, 2019 / 4:12 AM / 4 months ago

China iron ore rises on demand outlook; July imports seen flat

* Dalian iron ore jumps 1.8% in morning trade

* China iron ore imports in July seen flat m/m - Kpler

* Iron ore prices likely to peak in Q3 - Credit Suisse

By Enrico Dela Cruz

MANILA, July 26 (Reuters) - Iron ore futures in China were firmer in morning trade on Friday, supported by expectations that demand for the steelmaking input in the world’s top steel producer will remain strong as the nation launches more infrastructure projects.

Investors were actively trading the January 2020 iron ore contract on the Dalian Commodity Exchange, which ended the morning session up 1.8% at 746 yuan ($108.45) a tonne. Attention has shifted away from the previously most-active September contract, which hit a record-high 924.50 yuan on July 16.

Dalian iron ore turned volatile this week as some bearish indicators have emerged, such as a rebound in port stockpiles of the raw material, after hitting the lowest levels since early 2017 this month, and rising domestic steel inventory.

Benchmark spot 62% iron ore SH-CCN-IRNOR62 for delivery to China stood at $116 a tonne, as of Thursday, based on data from SteelHome consultancy. On July 3, it had rallied to as high as $126.50, the highest since January 2014.

Singapore-based steel and iron ore data analytics firm Tivlon Technologies is keeping its price forecast of $150 a tonne by October.

“We expect the launch of infrastructure projects in China to peak in the third quarter and further uplift demand for steel,” it said in a note.

China’s iron ore imports in July are likely to remain flat compared with June, but down 4.8% versus July 2018, according to French data firm Kpler, which tracks commodity flows.

The nation’s iron ore imports in June fell to 75.18 million tonnes, their lowest since February 2016, from 83.24 million tonnes in June 2018 and May’s 83.75 million tonnes, as supply declined from top miners in Australia and Brazil.

Brazilian miner Vale discharged 13.3 million tonnes of iron ore in July, up 7.18 million tonnes or 116% from June, Kpler said in a note.

However, among the Australian iron ore exporters, only Roy Hill is discharging more volumes this month, while Fortescue Metals Group, Rio Tinto and BHP are reducing July shipments to replenish their stocks after the sell-off in May and June, it said.

FUNDAMENTALS

* Credit Suisse has downgraded Fortescue to “neutral” from “outperform”, saying iron ore prices will peak this quarter and the miner’s stock will likely come under increasing pressure once the prices start pulling back.

* The most-active construction steel rebar on the Shanghai Futures Exchange, for October delivery, rose 1.1% to 3,961 yuan a tonne.

* Hot-rolled steel, used in cars and home appliances, climbed 0.9% to 3,881 yuan a tonne.

* China’s biggest auto industry association has cut its sales forecast for this year due to slowing economic growth, and now expects sales to fall for the second year running.

* China’s central government will not set output restriction levels on steel mills for the upcoming winter, but local governments will be asked to set restrictions based on steel firms’ situation, Ministry of Ecology and Environment Spokesman Liu Youbin said on Friday.

* Other steelmaking materials traded mixed, with Dalian coking coal down 0.5% at 1,399.50 yuan a tonne, while coke climbed 2.4% to 2,187.50 yuan.

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$1 = 6.8787 yuan Reporting by Enrico dela Cruz, Editing by Sherry Jacob-Phillips

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