* Goldman Sachs thinks most of price correction is done
* Rebar futures rise 1.5 pct, iron ore up 1 pct (Recasts, updates prices)
By Manolo Serapio Jr
MANILA, Nov 28 (Reuters) - Chinese iron ore futures jumped 1 percent on Wednesday, recovering after a three-day slide, as steel prices regained some lost ground following an early-week selloff that pushed steel into a bear market.
Goldman Sachs analysts said most of the price slide in both iron ore and steel might have been done, seeing the steelmaking ingredient returning to a range of $60 and $70 a tonne over the next 12 months.
China’s benchmark rebar steel contract fell 21 percent from this year’s peak on Monday as increased supply combined with slower demand, fuelled a rout in raw materials iron ore and coking coal.
Iron ore for January delivery on the Dalian Commodity Exchange closed up 1 percent at 471.50 yuan ($68) a tonne. It touched a low of 459 yuan on Tuesday, 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.
“In our view, most of the price correction should be behind us,” Goldman Sachs analysts said, projecting iron ore to recover to $70 in the first quarter on reduced supply and restocking demand from Chinese mills.
The most-active January rebar on the Shanghai Futures Exchange ended 1.5 percent higher at 3,644 yuan a tonne.
Coking coal futures rose 1.7 percent to 1,330 yuan per tonne and coke gained 0.4 percent to 2,123 yuan.
$1 = 6.9539 Chinese yuan Reporting by Manolo Serapio Jr.; editing by Richard Pullin and Subhranshu Sahu