December 8, 2017 / 3:27 AM / 3 months ago

Iron ore, coking coal sink deeper in China; but rebound seen

* Tighter coking coal supply may fuel recovery -Argonaut

* Pullback in steel, raw materials follows rally to 3-month highs

By Manolo Serapio Jr

MANILA, Dec 8 (Reuters) - Chinese coking coal futures tumbled more than 5 percent and iron ore dropped nearly 3 percent on Friday, extending steep losses from the session before as the steelmaking commodities tracked a retreat in steel prices after recent rapid gains.

China’s curbs on steel output to fight smog during winter have reduced inventories and output at the world’s top producer, helping fuel a rally in steel prices to three-month highs earlier this week.

Prices of iron ore and coking coal similarly jumped to their strongest level since September earlier this week, before retreating.

“Prices rose too fast and there has to be some consolidation,” said Helen Lau, analyst at Argonaut Securities in Hong Kong. “The market’s been really quite volatile, and this volatility started in bulks and then spread to base metals.”

The most-traded iron ore for May delivery on the Dalian Commodity Exchange was down 2.9 percent at 497.50 yuan ($75) a tonne by 0311 GMT.

Coking coal slumped 5.7 percent to 1,238 yuan a tonne and coke slid 3.8 percent to 2,030.50 yuan. Rebar on the Shanghai Futures Exchange slipped 1 percent to 3,838 yuan a tonne.

Lau said supply of coking coal remains tight, which should support a recovery in prices.

Along with slower imports, coking coal inventory at 100 independent coke plants in China dropped 19 percent from a year ago to 6.8 million tonnes for the week to Dec. 1, said Lau.

That is equivalent to 15.5 days of inventory, 9 percent lower from a year earlier, she said. Coking coal is processed into coke for use in steelmaking.

“Coking coal’s fundamentals are definitely better than iron ore,” said Lau, amid rising iron ore inventory in China.

Stockpiles of imported iron ore at China’s major ports reached 141.67 million tonnes as of Dec. 1, the highest since at least 2004, according to data tracked by SteelHome consultancy. SH-TOT-IRONINV

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB fell 5.3 percent to $65.70 a tonne on Thursday, according to Metal Bulletin.

That was the steepest single-day decline since May 5 for the spot benchmark, which hit a nearly three-month high on Monday, following a slide in Chinese iron ore futures on Thursday. ($1 = 6.6196 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)

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