January 20, 2020 / 3:50 AM / a month ago

China iron ore extends rally, hot-rolled steel coil hits record peak

* Benchmark Dalian iron ore hits highest in more than a week

* Spot 62% iron ore closes in on $100/tonne - SteelHome data

* China’s iron ore port stockpile drops for 3 straight weeks

* Shanghai hot-rolled steel coil futures scale record peak

By Enrico Dela Cruz

MANILA, Jan 20 (Reuters) - Chinese iron ore futures rose on Monday, extending last week’s gains, fuelled by concerns over supply of the steelmaking raw material and an improved outlook for steel demand, but lighter trade is expected as the Lunar New Year break approaches.

The Dalian Commodity Exchange’s most-traded iron ore contract, expiring in May, rose 1.3% to 675 yuan ($98.41) a tonne, its highest since Jan. 9.

Supply issues have also pushed spot iron prices higher, with the benchmark 62% iron-content ore at $96.70 a tonne as of Jan. 17, the strongest since Sept. 17 last year, data from SteelHome consultancy showed. SH-CCN-IRNOR62

Imported iron ore stocked at China’s ports fell for three weeks in a row, hitting 127.35 million tonnes on Friday, the lowest since the last week of September 2019, SteelHome data also showed. SH-TOT-IRONINV

Adding to supply concerns, Brazil’s Vale SA has halted tailings operations at its Esperança mine, citing the need to do a technical evaluation and potentially carry out work to improve safety at the site.

Vale, the world’s largest iron ore miner, said in December it would slash output from its Brucutu mine for up to two months while it evaluates the stability of a nearby dam, prompting it to lower its output guidance for the first quarter of 2020.

Anglo-American miner Rio Tinto, meanwhile, reported reduced iron ore shipments in the last quarter of 2019, highlighting its struggles to overcome fires, poor weather and operational challenges, analysts at ANZ Research said in a note.

Steel prices on the Shanghai Futures Exchange rose for a fourth straight session amid improving demand prospects, with the most-traded hot-rolled coil contract scaling a record peak.

China’s December macro-economic data released last week is mostly better than or in line with market expectations, which lifted overall investor sentiment, along with the signing of the U.S.-China Phase 1 trade deal, Argonaut Securities analyst Helen Lau said.

“With China government’s periodic monetary easing to fine tune the economic growth, we expect China’s 2020 economic conditions to be in a much better shape than in 2019,” Lau said. “Against this development, overall demand for commodities is set to improve in our view.”

FUNDAMENTALS

* The Shanghai Futures Exchange’s most-traded construction steel rebar contract was up 0.7% by 0320 GMT.

* Hot-rolled steel coil, used in cars and home appliances, climbed as much as 0.9% to a record-high of 3,655 yuan a tonne.

* Dalian coking coal gained 0.3% and Dalian coke advanced 0.9%.

* Shanghai stainless steel futures were down 0.3%.

* Many construction projects in China have been halted while some steel mills have shut down early ahead of the Lunar New Year break next week.

$1 = 6.8589 yuan Reporting by Enrico dela Cruz; Editing by Shailesh Kuber

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