March 29, 2019 / 2:43 AM / 2 months ago

China's iron ore futures rise as Vale cuts sales estimate

* Vale’s 2019 sales may be 75 mln T below prior f’cast

* Dalian iron ore set to post 4th monthly gain

* Shanghai rebar higher as downstream demand picks up

By Enrico Dela Cruz

MANILA, March 29 (Reuters) - Chinese iron ore futures rose on Friday, with the benchmark contract on track to post its fourth consecutive monthly gain, after miner Vale SA slashed its 2019 sales estimate for the steelmaking raw material by up to 75 million tonnes.

The estimate, which is 20 percent below the Brazilian miner’s prior forecast, is the latest blow to Vale from a tailings dam burst in January, which killed some 300 people. The world’s largest iron ore exporter also fired its chief executive officer earlier this month.

The May 2019 iron ore contract, the most traded on the Dalian Commodity Exchange, rose as much as 1.1 percent in early trade to 617 yuan ($91.57) a tonne.

The contract hit an intraday record-high of 657.5 yuan on Feb. 12 in the wake of the dam disaster, and analysts expect prices to remain elevated in the coming months.

“Some market participants and experts had estimated that the reduction could be around 40 million tonnes. So what Vale said about the production cuts was more than market expectations,” said metals and mining analyst Helen Lau at Argonaut Securities in Hong Kong.

The contract had dipped to its lowest in more than two weeks on Thursday in cautious trade amid a lack of clarity on Vale’s supply reduction, as well as rising inventory at Chinese ports.

Under its most optimistic scenario, Vale estimated its 2019 sales would be about 50 million tonnes below its previous forecast.

Notwithstanding supply disruptions, inventory of the steelmaking ingredient at Chinese ports SH-TOT-IRONINV continued to rise, hitting a six-month high of 148.6 million tonnes as of March 22, according to SteelHome consultancy.

But Lau said a projected supply deficit could keep iron ore prices elevated for some time.

“Before, prices were driven by expectations, concerns, worries about supply. But gradually, in reality, the market will really become very tight, and that may support further price rises,” she said.

Dalian coking coal was 0.7 percent lower at 1,226 yuan a tonne by 0213 GMT, but coke edged up 0.8 percent to 1,976 yuan.

The most-active May construction steel rebar contract on the Shanghai Futures Exchange was up 0.3 percent at 3,716 yuan a tonne, still supported by a pick-up in downstream demand.

Hot rolled coil was steady at 3,683 yuan a tonne.

($1 = 6.7381 Chinese yuan)

Reporting by Enrico dela Cruz; editing by Richard Pullin

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