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China iron ore erases 2020 losses on supply concerns, stimulus

Chinese iron ore futures rose more than 5% on Wednesday, the most since July last year, on worries over supply as more countries including top producers of the steelmaking raw material ordered lockdowns to contain the coronavirus pandemic.

Hopes for global stimulus and a revival in steel demand also buoyed overall sentiment, with U.S. lawmakers moving closer to passing a $2 trillion aid package and the Group of 20 major economies looking to advance a coordinated response to the pandemic.

Iron ore on the Dalian Commodity Exchange ended 5.1% higher at 665 yuan ($93.97) a tonne, wiping out its losses for this year. Futures on the Singapore Exchange rose 2.5% in afternoon trade.

Benchmark 62% iron ore’s spot price settled at $84.70 a tonne on Tuesday, up from Monday’s six-week low of $84.50, SteelHome consultancy data showed. SH-CCN-IRNOR62

If the price holds at $80 a tonne for the rest of March, the average price for the first quarter would be $88.50, said Wood Mackenzie research director Paul Gray, still above the consultancy’s pre-crisis forecast of $85.

“This is largely due to the resilience of Chinese hot metal production, coinciding with supply-side constraints in Brazil and Australia,” Gray said.

However, he said he believed “iron ore’s sell-off over the past few days is the start of a trend, not a blip,” adding that “the balance is tilting towards a bigger hit to iron ore demand than supply”.

“(China’s) targeted financial stimulus aimed at steel- intensive infrastructure should cushion the fall, but our pre-crisis forecast for an annual average price of $80/tonne CFR (including cost and freight), is undoubtedly at risk and subject to revision,” he said.

* South Africa and Australia, home to some of the world’s biggest iron ore mines, have imposed lockdown measures to slow the spread of the coronavirus.

* Brazilian iron ore miner Vale SA has suspended operations at its distribution facility in Malaysia.

* China’s first iron ore futures-based exchange traded fund has raised $11 million from institutional investors and clients at private banks, ahead of the Hong Kong listing on Friday.

* Construction steel rebar on the Shanghai Futures Exchange rose 1.5%, while hot-rolled coil gained 0.9% and stainless steel advanced 1.6%.
Source: Reuters (Reporting by Enrico dela Cruz; Editing by Aditya Soni)

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