February 12, 2020 / 7:51 AM / 13 days ago

UPDATE 1-China iron ore hits 3-week high as new coronavirus cases slow

* New coronavirus cases lowest since late Jan

* Outbreak may be over by April - China expert

* Vale Q4 iron ore production falls 22.4% y/y (Updates with closing prices, chart)

By Enrico Dela Cruz

MANILA, Feb 12 (Reuters) - China’s iron ore futures hit a three-week high on Wednesday as the number of new coronavirus cases in the country continued to fall and after Brazilian miner Vale SA posted a sharp drop in fourth-quarter output of the steelmaking raw material.

The Dalian Commodity Exchange’s most-traded iron ore contract gained as much as 3.6% to 622 yuan ($89.30) a tonne, its highest level since Jan. 23, and ended the session up 3.2%.

Iron ore futures on the Singapore Exchange was up 1.8% at $85.23 a tonne in afternoon trade.

Spot iron ore also scaled three-week highs, with the benchmark 62% grade for delivery to China SH-CCN-IRNOR62 settling at $85 a tonne on Tuesday, SteelHome consultancy data showed, amid a gradual reopening of factories.

“There are no significant changes in fundamentals, but things are improving in terms of demand due to business restarts,” said Richard Lu, senior analyst at commodity consultant CRU, in Beijing.

But caution should prevail, Lu said.

“The government is now pushing hard on business restarts, but these should be in an orderly manner and well organised. This means that we are still away from getting normality and demand will continue to be weak despite improving,” Lu said.

China reported 2,015 new confirmed cases on Tuesday, the lowest daily rise since Jan. 30, bringing the total to 44,653, according to health officials.

That sparked hopes that the worst of the epidemic, which has disrupted economic activity, prompted travel curbs and killed more than 1,100 people in China, may have passed.

“We expect that the rate of resumption of work will accelerate from next week,” Huatai Futures Co Ltd said in a note.

The outbreak could be over by April, according to the government’s senior medical adviser, but some analysts argue that the severity and length of the epidemic remain highly uncertain.

FUNDAMENTALS

* Vale reported a 22.4% year-on-year decline in fourth-quarter iron ore production, reigniting concerns about supply to top steel producer China.

* Steel traders in China are holding off returning to the market for their usual post-Lunar New Year purchases, as their appetite was dampened by sluggish demand from a construction sector hit by the coronavirus outbreak.

* Construction steel rebar on the Shanghai Futures Exchange edged up 0.3% while hot-rolled coil climbed 0.5%.

* Other ferrous raw materials also rose, with coking coal up 2.1% while coke advanced 2.5%.

($1 = 6.9654 yuan)

Reporting by Enrico dela Cruz; Editing by Aditya Soni and Amy Caren Daniel

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