August 22, 2019 / 3:49 AM / a month ago

China iron ore futures extend fall as steel output curbs deepen

* Dalian iron ore index hovers near 10-week low

* Singapore front-month contract trades below $80/T

* Spot 62% iron ore hits lowest in nearly 5 months

By Enrico Dela Cruz

MANILA, Aug 22 (Reuters) - Dalian iron ore futures extended their losses into a sixth session on Thursday amid fresh reports about stepped-up steel production curbs in top producer China, while the front-month contract in Singapore traded below $80 a tonne.

The most-traded January 2020 iron ore contract on the Dalian Commodity Exchange fell as much as 1.7% to 583.50 yuan ($82.58) a tonne, hovering near a 10-week low hit on Wednesday.

In the Singapore Exchange, the most-active October 2019 contract traded as low as $78.39 a tonne. It was up 1% at $78.49 by 0322 GMT.

Wu’an city, a major production base for wire rod and medium plate in China’s Hebei province, has decided to strengthen efforts to control air pollution by further restricting operations at nine steel mills over a 10-day period from Aug. 22, according to a report by Mysteel consultancy.

This follows a move by the top steelmaking city of Tangshan, also in Hebei, to deepen production cuts over a four-day period that ended on Wednesday.

The anti-pollution steel production curbs in China are widely expected to continue and may intensify ahead of the nation’s National Day celebrations in early October.

Dalian iron ore has fallen more than 20% in August, on track for its worst month since March 2018, after eight consecutive months of gains, as concerns over supply eased while demand slowed.

“We believe the selling has been overdone,” said ANZ senior commodity strategist Daniel Hynes. “We see prices stabilising at around USD90/t in the near term.”

Benchmark spot 62% iron ore for delivery to China SH-CCN-IRNOR62 slumped 5.5% on Wednesday to $86.50 a tonne, the lowest since March 29, SteelHome consultancy data showed.

“Steel output curbs in China and ongoing trade tension with the U.S. are the key headwinds,” Hynes said in a note. “These should result in growth in steel production easing from the 10.8% achieved in H1 2019.”


* Reduced iron ore shipments to China after a Vale tailings dam disaster in Brazil in January and a cyclone in Australia, while Chinese steelmakers ramped up output, lifted spot prices of the raw material to five-year peaks recently.

* Shipments from Brazil and Australia have picked up from lows seen in April and are likely to steadily rise for the rest of the year as Vale slowly restarts its mining operations, Hynes said.

* Still, Hynes believes the supply tightness will remain an issue for the foreseeable future, and said Vale may still miss its target to restore full capacity within two to three years.

* The most-active construction steel rebar contract on the Shanghai Futures Exchange was up 0.3% at 3,677 yuan a tonne by midday break.

* Hot-rolled coil, steel used in cars and home appliances, rose 0.3% to 3,702 yuan a tonne

* Other steelmaking ingredients were flat, with coking coal at 1,327 yuan a tonne, while coke was at 1,950.50 yuan.

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($1 = 7.0661 yuan)

Reporting by Enrico dela Cruz; Editing by Sriraj Kalluvila

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