February 14, 2019 / 7:36 AM / 8 months ago

UPDATE 1-Dalian iron ore rebounds, but mills' resistance remains

* Steel mills reluctant to accept high iron ore prices

* New wave of restocking to start next week

* Supply gap after Vale’s accident could be overrated -analysts (Updates closing prices)

BEIJING, Feb 14 (Reuters) - China’s iron ore futures recovered on Thursday after falling more than 4 percent in the past two sessions, but weak appetite for the high-priced raw material and doubts over actual supply disruption at the world’s biggest iron ore miner clouded the outlook.

The most-active iron ore contract for May delivery on the Dalian Commodity Exchange closed 0.7 percent higher to 628.5 yuan ($92.94) a tonne, ending the two-losing streak after touching a record-high level of 652 yuan on Monday.

“It’s hard for us to accept such high iron ore prices as the priority of steel mills at this moment is to reduce costs, rather than ramping up output,” said a purchase manager at a medium-sized steel firm in the province of Hebei.

Despite some corrections in the past days, iron ore prices remain near their record high levels.

“Most of steel mills in China are still on the Lunar New Year holiday break and will not start to replenish their stocks until next week,” the manager said, adding that the flat demand also weighed on iron ore prices.

Meanwhile, analysts start to re-estimate the actual supply gap, previously predicted at 70 million tonnes, caused by the deadliest dam accident in Brazil last month.

“We believe the amount of output cuts at Vale might have been over-rated,” analysts at Orient Futures said in a note.

Amid tepid trade after the holiday break, benchmark Shanghai rebar prices fell for the third session on Thursday, down 1.4 percent at 3,684 yuan a tonne.

Hot-rolled coil futures on the Shanghai Futures Exchange dipped 1.1 percent to 3,606 yuan a tonne.

Downstream users at construction sites and manufacturing plants typically resume their operations in late February.

Dalian coking coal futures ended 0.7 percent lower at 1,272.5 yuan, while coke prices climbed 0.8 percent to 2,088.5 yuan. ($1 = 6.7622 Chinese yuan renminbi) (Reporting by Muyu Xu and Dominique Patton; Editing by Subhranshu Sahu and Rashmi Aich)

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