November 7, 2019 / 7:47 AM / 11 days ago

UPDATE 1-China iron ore futures track spot markets to trade lower

* Dalian iron ore down 2.2%, Singapore iron ore slips 1.1%

* Court could annul Vale acquisition of Ferrous Resources

* Indonesia ore ban seen hitting stainless steel output (Updates with closing prices, chart)

By Enrico Dela Cruz

MANILA, Nov 7 (Reuters) - Benchmark Dalian iron ore futures declined on Thursday, tracking weak physical prices on rising inventories at China’s ports, though losses were limited due to restocking demand from some steel mills.

The Dalian Commodity Exchange’s most-traded iron ore contract, for delivery in January 2020, dropped 2.2% to 611 yuan ($87.14) a tonne.

On the Singapore Exchange, the front-month December iron ore contract was down 1.1% at $80.15 a tonne by 0702 GMT.

Benchmark spot 62% iron ore for delivery to China SH-CCN-IRNOR62 was steady at $83.50 a tonne on Wednesday, the weakest since Jan. 29, SteelHome consultancy data showed.

Spot prices of the steelmaking raw material are closing in on levels seen before the Jan. 25 collapse of a mine tailings dam in Brazil owned by Vale SA, which sparked a five-month rally in prices.

Imported iron ore inventories at Chinese ports are hovering around a six-month high, estimated at 131.65 million tonnes as of last Friday, based on SteelHome data. SH-TOT-IRONINV

Market participants shrugged off news that a Brazilian federal court could annul Vale’s acquisition of iron ore miner Ferrous Resources.

Vale said in August it had to temporarily halt operations at the Viga concentration plant of its newly acquired Ferrous Resources do Brasil unit due to “inconsistency in the documents.”

Notwithstanding the pressure from stabilising supply from top exporters Brazil and Australia, iron ore prices should find support as steel margins have improved, analysts at ANZ Research said in a note.

“Steel mills have been reluctant to restock raw materials as margins fell amid a gloomy outlook for steel demand,” they said. “However, margins have started rising again, raising the spectre of some pent up demand coming through the iron ore market.”

FUNDAMENTALS

* The most-traded construction steel rebar on the Shanghai Futures Exchange was down 0.8%, while hot-rolled steel coil, used in cars and home appliances, lost 0.9%.

* Dalian coking coal edged down 0.3% and Dalian coke slipped 0.8%.

* ArcelorMittal, the world’s largest steelmaker, reported core earnings slightly above market estimates on Thursday, but took a dimmer view of demand in its main U.S. and European markets.

* Shanghai stainless steel, which is produced from nickel pig iron (NPI), closed steady at 14,920 yuan a tonne.

* Indonesia’s nickel ore exports ban will sharply reduce top buyer China’s NPI output and have a knock-on effect on production of stainless steel, analysts say.

($1 = 7.0121 yuan)

Reporting by Enrico dela Cruz; Editing by Aditya Soni and Subhranshu Sahu

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