August 5, 2019 / 7:38 AM / 19 days ago

UPDATE 1-Iron ore crumbles as supply rises, demand wanes in China

* Dalian iron ore end’s at day’s downside limit

* Singapore iron ore futures fall below $100/T

* Spot 62% iron ore slumps to weakest in 7 weeks

* Imported iron ore stocks at China ports rise further (Adds slump in Singapore iron ore futures, Dalian closing prices, graphic)

By Enrico Dela Cruz

MANILA, Aug 5 (Reuters) - Dalian and Singapore iron ore futures fell below $100 a tonne on Monday as stockpiles rose, while demand may further weaken in China, the biggest consumer of the steelmaking ingredient and producer of more than half of the world’s steel supply.

The yuan weakening following an escalation in the Sino-U.S. trade war added to the overall downbeat investor sentiment.

The most-traded iron ore contract on the Dalian Commodity Exchange, with January 2020 expiry, fell by the daily exchange-imposed limit of 6% to 689.50 yuan ($98.09) a tonne, its weakest since July 5 this year.

The benchmark fell for a third session in a row amid seasonally weak demand for steel, particularly in China’s construction sector, and thinning steel production margins.

Singapore’s iron ore futures slid 8.6% to $94.32 a tonne.

“We remain marginally bullish in our overall assessment of supply,” said Hui Heng Tan, analyst at commodities broker Marex Spectron. “Spot supply availability continues to improve as mills remain in de-stocking mode and domestic production picks up.”

The demand outlook for iron ore and other steelmaking materials is not encouraging.

“Margins took a turn for the worse given weaker steel prices,” Tan said. “This means that the slowdown in steel rates will likely persist.”

Last week’s threat by U.S. President Donald Trump to impose an additional 10% tariff on $300 billion of Chinese imports from Sept. 1 also aggravated concerns over steel demand.

FUNDAMENTALS

* Benchmark spot 62% iron ore for delivery to China SH-CCN-IRNOR62 slid 4.7% to $112.50 a tonne on Friday, based on weekly data tracked by SteelHome consultancy, the lowest since June 18 this year.

* Imported iron ore stockpiles at Chinese ports SH-TOT-IRONINV rose for a third week in a row to 121.05 million tonnes, as of Friday, SteelHome data showed, as supplies from Brazil and Australia picked up. That was the highest since June 6 this year.

* Brazil’s iron ore exports rose 16.6% in July from the previous month to 34.3 million tonnes, the highest in nine months, as Vale resumed production at its largest iron ore complex in the country’s mining heartland.

* The most-active construction steel rebar contract on the Shanghai Futures Exchange, with October 2019 expiry, fell 1.4% to 3,753 yuan a tonne, its weakest finish since June 18 this year.

* The slowdown in China’s construction activity could be explained by the continuous increase in steel inventories for the last 10 weeks, Marex Spectron’s Tan said.

* Hot-rolled steel, used in cars and home appliances, slipped 1.4% to 3,688 yuan a tonne, its lowest close since June 20.

* Other steelmaking materials were mixed, with Dalian coking coal up 0.8% and coke down 1.0%.

* The yuan sank nearly 1.5% to 7.042, breaching the key level for the first time since the global financial crisis in 2008. The closely-managed currency’s move lower sets the stage potentially for a new front in the trade dispute.

* Frustrated by the failure to advance the trade agenda during the recent Shanghai talks, Trump had told trade adviser Robert Lighthizer to call China to warn that new tariffs were coming, two people familiar with the matter said on Friday.

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($1 = 7.0290 yuan)

Reporting by Enrico dela Cruz; editing by Richard Pullin and Sherry Jacob-Phillips

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