July 12, 2019 / 5:12 AM / 11 days ago

China iron ore set for best week in three on supply concerns

MANILA (Reuters) - Dalian iron ore futures edged higher on Friday, with lingering supply concerns driving the steelmaking commodity to its best week so far since around mid-June, though output restrictions in some of China’s steel hubs kept gains in check.

FILE PHOTO: A man walks by the iron ore blending site at Dalian Port, Liaoning province, China September 21, 2018. REUTERS/Muyu Xu

The most-traded iron ore on the Dalian Commodity Exchange for September delivery ended the morning session up 0.5% at 877 yuan ($127.62) a tonne and was on track to book its fifth consecutive weekly gain. It had risen 3.8% from last week as of the mid-day break.

Still, it was a largely volatile week for China’s ferrous complex as the focus of market participants shifted constantly between supply and demand fundamentals, and after China’s biggest steel companies sought government intervention in stabilizing iron ore prices.

Steel producers such as China Baowu Group, HBIS Group, Jiangsu Shagang Group and Ansteel Group questioned whether “non-market factors” had caused the recent surge in prices to record highs.

Benchmark 62% grade spot iron ore for delivery to China was steady at $119.50 a tonne on Thursday, but near the five-and-a-half year high of $126.50 hit on July 3, data from SteelHome consultancy showed.

While iron ore supply remains tight at ports in China, strict steel output limits - in the cities of Tangshan and Wu’an in the major steelmaking province of Hebei aimed at curbing pollution - have clouded the demand outlook for the raw material.

“Wu’an imposed output restrictions on 14 steelmakers as part of environmental policies from July 1 to Aug.31. The city will decide subsequent measures based on air quality,” ANZ said in a note. “This could be a drag on iron ore demand.”

Whether the restrictions in Tangshan will be lifted as scheduled on Aug. 1 will also depend on air quality conditions at the time.

FUNDAMENTALS

* Imported iron ore inventory at Chinese ports has fallen 18% this year in the wake of mine shutdowns in Brazil due to safety checks following the deadly collapse of one of miner Vale SA’s tailings dams.

* Weather-related disruptions in supply from Australia further reduced iron ore shipments to China in recent months.

* Iron ore port stocks in China hit a 2-1/2-year low of 115.25 million tonnes by the end of June, before rising slightly to 115.6 million tonnes last week, SteelHome data showed.

* Chinese steel futures edged lower, with the most-active construction steel rebar contract on the Shanghai Futures Exchange down 0.4% at 3,986 yuan a tonne. Hot rolled coil, the steel used in cars and home appliances, was down 0.6% at 3,845 yuan.

* Other steelmaking inputs were firmer. Dalian coking coal futures inched up 0.8% to 1,399.5 yuan a tonne, while coke was almost flat at 2,093 yuan.

Reporting by Enrico dela Cruz; Editing by Arun Koyyur

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