China iron ore marks longest rally since mid-2016 as supply concerns mount
China’s iron ore futures rose on Friday, marking their longest streak of gains since June 2016, as concerns over tightening seaborne supplies of the steelmaking raw material pushed spot prices to four-week highs.
Rising for a ninth straight session, iron ore on the Dalian Commodity Exchange ended 2.8% higher at 675.50 yuan ($96.04) a tonne. It posted a weekly gain of 8.4%, the biggest since last September.
The rally began after Brazil’s Vale SA on Feb. 11 scaled down its first-quarter iron ore production outlook following heavy rain that hampered operations.
The miner’s latest output guidance does not take into account any impact from the coronavirus outbreak in top iron ore buyer and steel producer China.
Supply worries intensified after Anglo-Australian miner Rio Tinto on Monday lowered its 2020 shipment forecast for the steelmaking raw material from Australia’s Pilbara region after a tropical cyclone damaged infrastructure.
The downbeat supply estimates from Vale and Rio came as iron ore shipments to China from Brazil and Australia have already been on a downward trend since the start of the year.
China’s iron ore imports were estimated at an average 3.2 million tonnes a day in January, down from the prior month’s average of 3.3 million tonnes a day, according to French data firm Kpler, which tracks commodity flows.
The average dipped to 2.936 million tonnes a day in the first half of February and has fallen further, with the latest month-to-date daily average at 2.912 million tonnes, said Alexander Booth, Kpler head of market analysis.
China continues to produce steel despite tightening iron ore supply and weak downstream demand in the wake of factory shutdowns, work stoppages and travel curbs intended to contain the epidemic.
“Steel mills are still running, albeit at slower run rates, to cover costs,” said ANZ commodity strategists in a note.
* Spot prices of benchmark 62% iron ore settled at $92.50 a tonne on Thursday, the highest since Jan. 22, SteelHome consultancy data showed. SH-CCN-IRNOR62
* Steel futures extended gains, buoyed by expectations that Beijing will continue to ramp up policy easing measures in coming months to counter economic fallout from the epidemic that continues to spread and disrupt global businesses.
* Construction steel rebar on the Shanghai Futures Exchange climbed 1.3%, while hot-rolled coil rose 1.1%.
* Coking coal slumped 0.9% but coke gained 0.4%.
Source: Reuters (Reporting by Enrico dela Cruz; editing by Richard Pullin and Aditya Soni)