February 13, 2020 / 3:27 AM / 9 days ago

China, Singapore iron ore futures extend gains as supply concerns mount

* Heavy rain in Brazil disrupts miner Vale’s operations

* Dalian iron ore, spot prices jump to three-week highs

* Coronavirus death toll leaps in China’s Hubei province

By Enrico Dela Cruz

MANILA, Feb 13 (Reuters) - China’s iron ore futures extended gains into a third straight session on Thursday as concerns over supply cuts from Brazil and Australia drove spot prices of the bulk commodity higher, but worries over the coronavirus epidemic capped gains.

The Dalian Commodity Exchange’s most-traded iron ore contract, with May expiry, rose as much as 2% to 626.50 yuan ($89.78) a tonne in early trade, its highest since Jan. 23.

On the Singapore Exchange, the front-month March contract for the steelmaking raw material gained 0.4% to $86.16 a tonne.

Despite weak demand for iron ore in the physical market, spot prices scaled a fresh three-week high on Wednesday, with the benchmark 62% grade climbing to $87 a tonne, SteelHome consultancy data showed. SH-CCN-IRNOR62

That translates to a 4.8% gain so far for this week, after prices dipped to their lowest in nearly three months last week.

On Wednesday, Brazilian miner Vale SA reported that the volume of rainfall recorded in Minas Gerais, the country’s iron ore-producing region, was higher than the historical average.

“Heavy rain in Brazil has forced Vale to cut its first- quarter guidance on output by 5mt (million tonnes),” commodity strategists at ANZ wrote in a note, while also citing a decline in output from Australia.

Costlier raw materials and declining steel prices in China, where the coronavirus epidemic has disrupted economic activity, may squeeze steel mills’ profit margins.

“The signs of softer demand for iron ore should limit the upside,” ANZ strategists said.

Amid weak downstream demand, the inventory of construction steel rebar in China has piled up to the highest since April 2019, SteelHome data showed. SH-TOT-RBARINV

FUNDAMENTALS

* China’s Hubei province, the epicentre of the coronavirus outbreak, reported an additional 242 people had died, the fastest rise so far in the daily count, bringing the death toll in China to more than 1,310.

* There were 14,840 new coronavirus cases in Hubei, a big jump from the 2,015 additional confirmed cases reported in the mainland on Wednesday, after a new methodology for counting infections was adopted.

* Construction steel rebar on the Shanghai Futures Exchange was unchanged at 3,404 yuan a tonne, as of 0251 GMT.

* Hot-rolled steel coil, used in cars and home appliances, was up 0.2%.

* Dalian coking coal was down 0.2% while and coke edged up 0.8%.

($1 = 6.9785 yuan)

Reporting by Enrico dela Cruz; Editing by Arun Koyyur

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