October 17, 2019 / 5:43 AM / a month ago

Iron ore prices tumble to 7-week low on demand decline worries

* Dalian, Singapore iron ore futures slump

* Spot 62% iron ore also hits 7-week low

* Shanghai steel futures extend losses

By Enrico Dela Cruz

MANILA, Oct 17 (Reuters) - Benchmark Dalian iron ore futures were set to extend a three-day losing streak on Thursday, on fears that demand for the steelmaking raw material will be hurt further by a bruising U.S.-China trade war.

Trade tensions between the United States and China, the world’s two largest economies, are a significant source of risk for the global economy, with “real spillover effects” for emerging markets, top IMF officials said on Wednesday.

Steel demand in top consumer and producer China is forecast to grow just 1% next year, compared with this year’s projected growth of 7.8%, according to the World Steel Association, which blamed the ongoing trade conflict.

Global steel demand growth will slow to 1.7% in 2020, from a 3.9% growth forecast this year, the Belgium-based group said.

“The negative news flow is certainly dragging iron ore prices lower,” said Argonaut Securities’ metals and mining analyst Helen Lau.

Dalian Commodity Exchange’s most-traded iron ore contract, with January 2020 expiry, dropped as much as 3.5% to 607 yuan ($85.52) a tonne, its lowest since Sept. 2. It was down 2.9% by noon break.

On the Singapore Exchange, the front-month November contract was down 1.1% at $82.27 a tonne, the weakest since late August.

Prices of spot cargoes of benchmark iron ore with 62% iron content for delivery to China SH-CCN-IRNOR62, fell to $89.50 a tonne on Wednesday, also the lowest since Sept. 2, from Tuesday’s $91.50, based on SteelHome consultancy data.

Two of the world’s biggest iron ore miners, Vale SA and Rio Tinto , earlier this week reported higher quarterly output and shipments, sending signals that global production has largely stabilised.

“If iron ore production continues to improve, that is also an additional concern,” said Lau.

In January, a deadly mine tailings dam collapse in Brazil prompted dam and mine shutdowns for safety checks in the country, squeezing global iron ore supply and pushing prices to five-year highs in July.

Some developments, however, offer a silver lining, Lau said, with U.S. President Donald Trump saying he expected to sign the first phase of a trade deal with Chinese President Xi Jinping next month.

FUNDAMENTALS

* BHP Group Ltd, the world’s biggest miner, posted a slight dip in its September quarter iron ore production due to planned maintenance at a key port, but maintained its fiscal 2020 iron ore production forecast.

* Steel production restrictions in some of China’s industrial hubs aimed at curbing air pollution are also clouding the demand outlook for iron ore and other steelmaking raw materials, according to traders and analysts.

* The most-traded construction steel rebar contract on the Shanghai Futures Exchange slipped 0.4% to 3,310 yuan a tonne.

* Hot-rolled steel coil, used in cars and home appliances, edged lower by 0.5% to 3,297 yuan a tonne.

* Dalian coking coal edged up 0.2% to 1,227.50 yuan a tonne, but Dalian coke fell 0.7% to 1,780.50 yuan.

* Stainless steel, made from nickel pig iron, slumped 2.3% to 15,150 yuan a tonne, tracking losses in nickel prices .

$1 = 7.0975 yuan Reporting by Enrico dela Cruz; Editing by Amy Caren Daniel

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