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Iron ore soars on Pilbara incident, China pre-holiday demand

Dalian iron ore futures jumped to a three-week high on Thursday after Fortescue Metals Group halted mining operations at a Pilbara project, while hopes of improved Chinese demand in the fourth quarter provided further support.

Iron ore miner Fortescue FMG.AX said an employee had died after a ground collapse at its Solomon Hub site in Australia’s Pilbara region.

January iron ore on China’s Dalian Commodity Exchange DCIOcv1 ended daytime trading 5.4% higher at 721.50 yuan ($111.58) a tonne, after scaling 758 yuan, its loftiest since Sept. 8, earlier in the day.

November iron ore on the Singapore Exchange SZZFX1 was up 3.4% at $118.45 a tonne by 0707 GMT, off a two-week high of $127.80.

This week’s gains in iron ore futures markets also mirrored the rebound in spot prices in top steel producer China, underpinned largely by restocking demand ahead of the nation’s Golden Week holiday from Oct. 1.

Dalian iron ore, however, marked its first quarterly loss in two years and third consecutive monthly decline, having tumbled 42% since hitting a record peak in mid-May.

Caution prevailed in Chinese metals markets amid power curbs and shortages that have prompted production cuts, and the China Evergrande debacle.

“The power crunch is resulting in many steel mills having to cut production,” ANZ senior commodity strategist Daniel Hynes said, citing industry data that showed a 7.2% month-on-month output decline in the first two weeks of September.

The power shortage has dampened iron ore demand that has already been hammered as China seeks to limit steel output to reduce carbon emissions.

Rebar on the Shanghai Futures Exchange SRBcv1 climbed 1.2%, while hot-rolled coil SHHCcv1 gained 0.4%. Stainless steel SHSScv1 slumped 2.4%.

Dalian coking coal DJMcv1 hit the day’s upside limit of 9% ahead of the holiday and scaled a contract high, while coke DCJcv1 jumped 4.4% – both also benefitting from a supply crunch.
Source: Reuters (Reporting by Enrico Dela Cruz in Manila; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)

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