August 21, 2019 / 3:03 AM / 3 months ago

China iron ore extends slump to hit 10-week low on gloomy BHP outlook

* Dalian iron ore falls below 600 yuan/T

* Singapore iron ore futures slump 5.5%

* Miner BHP flags global growth headwinds

* Coke futures slip nearly 3%

By Enrico Dela Cruz

MANILA, Aug 21 (Reuters) - Iron ore futures in China sank to their lowest in 10 weeks on Wednesday, extending losses along with coke, after mining giant BHP Group gave a downbeat outlook for steelmaking raw material prices.

The most-traded iron ore on the Dalian Commodity Exchange , for January 2020 delivery, fell as much as 5.2% in early trade to 584 yuan ($82.7) a tonne, its weakest since June 10.

The most-active coke contract, also with January 2020 expiry, slumped as much as 2.8% to 1,927.50 yuan a tonne.

BHP, the world’s biggest miner, has warned global economic headwinds, such as the U.S.-China trade war, could hit demand for its key commodities, including iron ore.

BHP expects average benchmark prices for steelmaking raw materials to be lower in financial year 2020 versus 2019, although it said prices are likely to remain above long-run marginal cost amid global supply disruptions.

Seaborne iron ore supply conditions for the remainder of 2019 and next year are “highly uncertain, both in aggregate and in terms of quality profile”, BHP said in its latest economic and commodities outlook.

“(BHP’s outlook) suggested the market could see considerable volatility in prices ahead as the market continues to adjust to supply disruptions,” ANZ Research said in a note.

Reduced iron ore shipments to China after a tailings dam disaster in Brazil in January and a cyclone in Australia, while Chinese steelmakers continued to ramp up output, lifted spot prices of the raw material to five-year peaks in recent months.

Prices have pulled back in recent weeks as shipments to China has rebounded, while steel demand is seasonally weak and output restrictions are in place in some steelmaking hubs, but they remain well above 2018 levels.

FUNDAMENTALS

* The most-active September 2019 iron ore contract on the Singapore Exchange slid as much as 5.5% to $81.66 a tonne in early trade.

* “Buoyant iron ore pricing is not expected to continue into FY20 so the focus now turns to BHP delivering on the cost out and volume growth promised,” UBS said, after the miner posted its largest annual profit in five years and record full-year dividends on Tuesday.

* Benchmark spot 62% iron ore for delivery to China SH-CCN-IRNOR62 settled at $91.50 a tonne on Tuesday, from Monday’s $92.50.

* The most-active contruction steel rebar contract on the Shanghai Futures Exchange dropped as much as 2.4% to 3,637 yuan a tonne.

* Hot rolled coil, steel used in cars and home appliances, was down as much as 1.8% at 3,661 yuan a tonne.

* Dalian coking coal slipped 1.2% to 1,322 yuan a tonne.

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MARKETS NEWS

* Asian shares fell on Wednesday as fresh worries about a global recession led investors to dump risky assets, with U.S. President Donald Trump showing no signs of backing down in his trade war with China.

Reporting by Enrico dela Cruz; Editing by Rashmi Aich

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