July 26, 2019 / 8:12 AM / a month ago

UPDATE 1-China iron ore rallies as blanket winter steel curbs ruled out

* Dalian iron ore trading shifts to Jan 2020 contract

* No blanket winter output cuts for China heavy industry

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

* Iron ore prices likely to peak in Q3 - Credit Suisse (Recasts, updates with closing prices and graphic)

By Enrico Dela Cruz

MANILA, July 26 (Reuters) - Benchmark Dalian iron ore futures rallied on Friday after China ruled out setting overall output restrictions on heavy industry for the coming winter, including steelmaking plants, despite its campaign to curb pollution.

Expectations that China, the world’s top steel producer, will launch more infrastructure projects this year boosted support to the steelmaking raw material.

Investors actively traded the January 2020 iron ore contract on the Dalian Commodity Exchange, which ended 4.2% higher at 764 yuan ($111.05) a tonne.

Attention shifted away from the previously most-traded September contract, which hit a record-high 924.50 yuan on July 16 amid supply concerns and robust demand.

Any production limits for the heavy industry during winter will be set by local governments depending on manufacturers’ emissions, the environment ministry said on Friday.

Dalian iron ore turned volatile this week as some bearish indicators had emerged recently, 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. SH-TOT-IRONINV

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 $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 downgraded Fortescue’s stock as it expects iron ore prices to peak this quarter.

* Construction steel rebar on the Shanghai Futures Exchange edged up 0.6% to 3,940 yuan a tonne.

* Small steel mills in China are taking advantage of lax environmental enforcement to ramp up production ahead of bigger rivals, industry and government officials said, jeopardising anti-smog targets and defying industry consolidation.

* Hot-rolled steel, used in cars and home appliances, was almost flat at 3,846 yuan a tonne, as China’s biggest auto industry association cut its sales forecast for this year due to slowing economic growth. It expects sales to fall for the second year running.

* Other steelmaking materials traded mixed, with Dalian coking coal down 0.3% at 1,402 yuan a tonne, while coke climbed 2.0% to 2,180.50 yuan.

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($1 = 6.8798 yuan)

Reporting by Enrico dela Cruz, Editing by Sherry Jacob-Phillips

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