(Refiles to correct day in first paragraph to Wednesday)
* Rebar futures up slightly, coking coal also higher
* Goldman Sachs thinks most of selloff in iron ore is done
By Manolo Serapio Jr
MANILA, Nov 28 (Reuters) - Chinese iron ore futures ticked higher after a three-day decline on Wednesday, but the steelmaking raw material traded close to 4-1/2-month lows as concerns over plentiful supply capped gains in steel prices.
China’s steel sector slid into a bear market on Monday, with the benchmark rebar contract sliding 21 percent from this year’s peak as increased supply combined with slower demand, fueling a rout in iron ore and coking coal.
Iron ore for January delivery on the Dalian Commodity Exchange was up 0.3 percent at 468.50 yuan ($67) a tonne by 0202 GMT, not far above Tuesday’s low of 459 yuan, which was the weakest since July 11.
“We think the broad-based sell-off in steelmaking raw materials is mainly driven by weakening steel margins, which in turn is due to looser-than-expected winter steel production curtailment and higher-than-expected steel supply in a macro environment with elevated uncertainties and weak sentiment,” Goldman Sachs analysts said in a report.
Instead of repeating last winter’s blanket curbs, China allowed cities and provinces to decide their own output restrictions based on emission levels during the current winter heating season that should last through March.
Traders are worried the seasonal weakness in steel demand during winter could extend through next year with the Chinese economy facing risks from a protracted trade dispute with the United States.
Chinese mills ran up losses for the first time in three years this month, ending years of solid profit margins.
Spot iron ore prices fell further, with the 62-percent benchmark for delivery to China SH-CCN-IRNOR62 slipping 0.8 percent to $63.40 a tonne on Tuesday, according to SteelHome consultancy. That was its lowest since July 17 and came after the spot benchmark’s 12.3-percent slump on Monday.
“At $64/tonne, we think most of the correction is behind us,” Goldman Sachs analysts said, sticking to their three-month target price of $70 a tonne and $60 a tonne over the next six to 12 months.
The most-active January rebar on the Shanghai Futures Exchange was up 0.5 percent at 3,608 yuan a tonne.
Coking coal futures rose 0.9 percent to 1,320 yuan per tonne and coke gained 0.4 percent to 2,122.50 yuan.
$1 = 6.9542 Chinese yuan Reporting by Manolo Serapio Jr.; editing by Richard Pullin