January 21, 2016 / 3:55 AM / 4 years ago

Dalian iron ore futures extend losses as supply glut concerns persist

* Iron ore, rebar futures stretch losses
    * High port inventories and oversupply hurt ore prices
    * CISA sees steel oversupply not to ease in Q1

    SHANGHAI, Jan 21 (Reuters) - Chinese iron ore futures
dropped for the second straight session on Thursday as piling
iron ore inventories at ports in the world's top consumer and
oversupply pressured the raw material.
    Iron ore inventories at China's big ports have surged to
above 100 million tonnes, traders said, as Chinese steel mills
are running low operation rates while top miners in Australia
and Brazil continue ramping up to production. 
    "High port stockpiles have suggested the supply glut remains
overwhelming which will keep pressuring prices," said Sun Feng,
an analyst with Orient Futures in Shanghai.
    "Some investors are longing the raw material as they believe
low inventories of steel products mean steel demand could pick
up, but a cooling economy may fail their expectation."
    The most active iron ore futures for May settlement on the
Dalian Commodity Exchange dropped nearly 1 percent to
314.5 yuan ($47.8) a tonne by midday break.
    "The (steel) market supply and demand condition will not
improve largely in the first quarter, so steel prices are likely
to stay volatile at low levels," the China Iron & Steel
Association said in a report on Wednesday.
    The benchmark May contract for rebar futures on the Shanghai
Futures Exchange traded 0.7 percent lower at 1,813 yuan
a tonne by midday break.
    China has determined to tackle the overcapacity in
industrial metals including steel and cement this year and let
more inefficient producers to shut down.
    The move, aiming to squeeze steel production, is expected to
support steel prices but to pressure iron ore prices due to
lower demand, traders said.
    Iron ore for delivery to China's Tianjin port .IO62-CNI=SI
slumped 2.4 percent to $41.1 a tonne on Wednesday, down from a
two-week high after four days of gains, according to The Steel
Index.
  Rebar and iron ore prices at 0330 GMT                                         
                                                                                
  Contract                          Last    Change   Pct Change                 
  SHFE REBAR MAY6                   1813    -13.00        -0.71                 
  DALIAN IRON ORE DCE DCIO MAY6    314.5     -3.00        -0.94                 
  SGX IRON ORE FUTURES FEB         39.75     +0.30        +0.76                 
  THE STEEL INDEX 62 PCT INDEX      41.1     -1.00        -2.38                 
  METAL BULLETIN INDEX             41.61     -1.17        -2.73
                                                                                
                                                                                
  Dalian iron ore and Shanghai rebar in yuan/tonne                              
 Index in dollars/tonne, show close for the previous trading day                
 ($1 = 6.5794 Chinese yuan renminbi)

 (Reporting by Ruby Lian and David Stanway; Editing by Gopakumar
Warrier)
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