March 23, 2017 / 7:23 AM / 8 months ago

UPDATE 1-China iron ore hits 10-week low as steel stretches losses

* Dalian iron ore falls nearly 2 pct, Shanghai rebar down 1.3 pct

* Weak futures dragged spot iron ore to six-week low (Updates prices)

By Manolo Serapio Jr

MANILA, March 23 (Reuters) - Iron ore futures in China dropped to their lowest in more than two months on Thursday, pressured by a continued slide in steel prices amid concern over slower demand in the world’s top consumer.

Chinese iron ore futures have lost more than 21 percent since touching a record high last month, and its slump has fuelled a 10 percent drop in spot iron ore prices during the same period.

The most-traded iron ore on the Dalian Commodity Exchange closed down 1.9 percent at 580.50 yuan ($84) a tonne after falling to 577 yuan, its lowest since Jan. 10.

Iron ore tumbled nearly 16 percent on Wednesday, extending losses in overnight trading, as the most-active contract rolled over to September.

Heavy selling in iron ore futures was driven by concerns over weaker demand, ANZ analysts said in a note.

“However, with steel production expected to lift in coming months and disruptions to exports from Australia in recent weeks, we expect this selloff to be relatively limited,” they said.

The most-active rebar on the Shanghai Futures Exchange slid 1.3 percent to end at 3,127 yuan per tonne, not far above a session trough of 3,118 yuan.

Iron ore’s rally this year was spurred by the surge in Chinese steel prices on hopes of stronger construction demand, along with Beijing’s efforts to curb excess steel capacity. A retreat in steel prices consequently pulled down iron ore as market focus switched back to high inventory of the steelmaking ingredient in China.

Iron ore stocked at China’s major ports reached 131 million tonnes on Friday, the highest since at least 2004, according to SteelHome consultancy. SH-TOT-IRONINV

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB fell 3 percent to $84.99 a tonne on Wednesday, its weakest since Feb. 9, according to Metal Bulletin.

The spot benchmark touched a 30-month high of $94.86 a tonne on Feb. 21.

“We see iron ore prices falling to $60/tonne by year-end as rising seaborne supply offsets a modest lift in iron ore demand,” Commonwealth Bank of Australia said in a note.

$1 = 6.8881 Chinese yuan Reporting by Manolo Serapio Jr.; Editing by Tom Hogue and Sunil Nair

Our Standards:The Thomson Reuters Trust Principles.
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