July 24, 2019 / 7:53 AM / 3 months ago

UPDATE 1-China iron ore slumps as Vale wins approval to resume Vargem Grande ops

* Dalian iron ore falls to weakest since July 8

* Vale to partially resume ops at Vargem Grande complex

* Vale reaffirms 2019 iron ore sales guidance

* Construction material rebar falls for 6th session (Recasts, adds closing prices and graphic)

By Enrico Dela Cruz

MANILA, July 24 (Reuters) - Chinese iron ore futures fell nearly 5% on Wednesday after miner Vale SA won approval to resume some processing operations, while Shanghai rebar steel extended losses into a sixth session.

The Brazilian miner said the move at the Vargem Grande complex should add 5 million tonnes to annual production, and reaffirmed its 2019 guidance for iron ore and pellets sales, easing concerns over supplies of the steel making ingredient.

Brazil’s mining regulatory agency had ordered Vale to halt operations at Vargem Grande in February to guarantee the stability of its dams, following a deadly dam burst in January.

The most-actively traded iron ore contract on the Dalian Commodity Exchange, for September delivery, fell as much as 4.7% to 842 yuan a tonne, its weakest since July 8. It closed down 2.7% at 860 yuan.

The construction steel rebar contract on the Shanghai Futures Exchange, for October delivery, ended down 1.3% at 3,899 yuan a tonne, after hitting a one-month low of 3,878 yuan earlier in the session.

“The derivatives market is seeing some softness temporarily due to traders shifting their positions around, while the physical markets across steel and iron ore look very robust,” said Darren Toh, a data scientist with Singapore-based steel and iron ore analytics firm Tivlon Technologies.

The rest of China’s ferrous markets have retreated after last week’s gains, led by iron ore, but Toh said a rebound could be expected.

“Our in-house machine learning model on iron ore is observing further strengthening in steel margins starting from August,” he said.

Hot-rolled steel used in cars and home appliances dropped 1.5% to 3,827 yuan a tonne.

FUNDAMENTALS

* Dalian iron ore stretched losses into a third day, also hurt by more output restrictions on steel producers in China’s top steelmaking city of Tangshan.

* The iron ore benchmark has fallen 7% since July 16, when it hit an intraday record high of 924.50 yuan amid falling inventory of imported ore at Chinese ports and brisk demand for the material as steel producers continued to ramp up output.

* Benchmark spot 62% iron ore SH-CCN-IRNOR62 for delivery to China, was down 0.4% at $119.50 a tonne on Tuesday, data from SteelHome consultancy showed.

* Iron ore prices reached their highest levels in more than five years earlier this month on concerns about disruptions in supply from top producers Australia and Brazil.

* Steelmaking inputs were mixed, with coking coal up 1% and coke down 1.4%.

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Reporting by Enrico dela Cruz; editing by Richard Pullin

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