August 13, 2014 / 4:28 AM / 3 years ago

Spot iron ore at near 3-week low, Dalian futures stretch losses

* Shanghai rebar, Dalian iron ore hit lowest since late July
    * Spot iron ore has fallen nearly 30 pct this year

    By Manolo Serapio Jr
    SINGAPORE, Aug 13 (Reuters) - Spot iron ore prices fell to their lowest in almost three
weeks as a softer steel market in top consumer China sapped buying interest for immediate
cargoes, and weaker Dalian ore futures pointed to further losses.
    Most commodities retreated on Wednesday with copper dropping to its weakest since June and
Brent oil trading near 13-month lows as geopolitical tensions from Iraq to Ukraine dimmed the
outlook for the global economy.
    The price declines came ahead of Chinese economic data due later in the day that should
provide more clues on the health of the world's second biggest economy. Those figures due out at
0530 GMT include industrial output and retail sales for July. 
    While recent data have shown strength in China's factory activity and exports, a weaker
services sector and imports suggest more stimulus measures may be needed to ensure a sustained
recovery.
    Benchmark 62-percent grade iron ore for immediate delivery to China .IO62-CNI=SI fell 1.4
percent to $94 a tonne on Tuesday, the lowest since July 24, according to data compiled by Steel
Index.
    Tuesday's drop was the steepest for iron ore since it lost more than 2 percent on June 16
when it touched $89, its cheapest since September 2012. 
    The price of the raw material that is the top revenue earner for global miners Rio Tinto
 and Vale has fallen nearly 30 percent this year.
    Offers of iron ore cargoes remain plenty, said an iron ore trader in Shanghai who is also
selling shipments for Chinese steel mills that have excess stocks from their long-term contracts
with miners.
    "It's not easy to locate a buyer because there's a lot of competitors selling similar types
of cargo in the market," he said.
    The most-traded January iron ore contract on the Dalian Commodity Exchange fell to
660 yuan ($107) per tonne, also the lowest since July 24. It was down 0.8 percent at 661 yuan by
midday.
    Apart from plentiful supply, weaker steel prices have also been a drag on iron ore. The
price of steel billet in China's key Tangshan area has fallen by 30 yuan per tonne from the
weekend through Tuesday to 2,650 yuan, traders said.
    Rebar for January delivery on the Shanghai Futures Exchange hit 3,043 yuan a tonne
on Wednesday, its lowest since July 25.                 
    "Speculation that the Chinese government won't introduce further stimulus this year and
concerns over a weak construction sector seem to be renewing pessimism in steel," Australia and
New Zealand Bank said in a note.
    Beijing has introduced measures to stimulate the economy since April, including hastening
construction of railways and public housing and allowing local governments to loosen property
curbs.
    The recent weakness seen in China's services sector appeared linked to the cooling
steel-intensive property market, which may be facing a prolonged slump that could hurt related
businesses and dampen consumer confidence. 
    
  Rebar and iron ore prices at 0404 GMT
                                                                                               
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN5                   3046    -15.00        -0.49
  DALIAN IRON ORE DCE DCIO JAN5      661     -5.00        -0.75
  SGX IRON ORE FUTURES SEP         93.24     -0.01        -0.01
  THE STEEL INDEX 62 PCT INDEX        94     -1.30        -1.36
  METAL BULLETIN INDEX             94.24     -0.98        -1.03
                                                                                               
                                                                                               
  Dalian iron ore and Shanghai rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 (1 US dollar = 6.1595 Chinese yuan)

 (Reporting by Manolo Serapio Jr.; Editing by Biju Dwarakanath)

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