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China iron ore hits two-week high as tight supply back in focus

Chinese iron ore futures rose more than 3% on Tuesday, extending gains for a fourth straight session, on expectations that imports of the steelmaking material remained weak in July, keeping supply somewhat tight in the world’s top steel producer.

Supporting the upbeat outlook for prices, iron ore demand may pick up when China’s top steelmaking city of Tangshan lifts anti-pollution output curbs later this week, as scheduled.

The most-traded iron ore on the Dalian Commodity Exchange, for January 2020 delivery, gained as much as 3.5% to 780 yuan ($113.23) a tonne. It ended the session up 2.4% at 771.50 yuan, its highest close since July 16.

Average weekly shipments of iron ore to China from top exporters Brazil and Australia in the first three weeks of July were lower compared to June levels, said Argonaut Securities’ metals and mining analyst Helen Lau.

Average weekly shipment from Brazil decreased 8% versus June to 5.9 million tonnes, while cargoes from Australia decreased 13% to 15 million tonnes, she said, citing some industry tracking data.

“The data shows shipments are not recovering and not very stable,” Lau said. “We need to closely monitor these shipments on a weekly basis.”

Data provider Kpler expects China’s iron ore imports in July to be flat compared with June, but down 4.8% versus July 2018, saying Brazil’s Vale ramped up shipments but major Australian miners reduced their exports.

China’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.

Moody’s Investors Service revised its price-sensitivity ranges for iron ore to $60-$90 a tonne from $45-$75, citing tight supply.

Benchmark spot 62% iron ore for delivery to China was up 0.4% on Monday at $118 a tonne, according to data tracked by SteelHome consultancy.

Mine closures in Brazil and lower production in Australia have pushed the iron ore market into deficit, with the situation expected to improve only slowly through this year and 2020, Moody’s said in statement on Monday.

“Our new price ranges for iron ore reflect our expectation that only limited incremental new capacity will be added over the next few years,” said Carol Cowan, a Moody’s senior vice president.

“While higher output from major global miners and Chinese domestic producers will see prices go down somewhat, supply will not fully recover in the near future,” she said.

* Imported iron ore stockpiles at China’s ports climbed for a second straight week, rebounding to 119.25 million tonnes as of July 26, SteelHome data showed. The inventory had shrank earlier this month to the lowest since January 2017.

* The most-active construction steel rebar contract on the Shanghai Futures Exchange was down 0.5% at 3,886 yuan a tonne, its weakest finish since June 21.

* Hot-rolled steel, used in cars and home appliances, slipped 0.9% to 3,785 yuan a tonne, also a five-week low.

* Coking coal ended almost unchanged at 1,397.50 yuan a tonne, but coked slipped 1.3% to 2,150 yuan.
Source: Reuters (Reporting by Enrico dela Cruz; Editing by Rashmi Aich and Sherry Jacob-Phillips)

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