* Selloff in Chinese commodity futures as yuan strengthens
* Dalian iron ore futures down for 2nd straight week
* But demand for future iron ore cargoes “very good” - trader (Recasts, adds yuan rally and iron ore imports, updates prices)
By Manolo Serapio Jr
MANILA, Sept 8 (Reuters) - Steel and iron ore futures in China skidded for a fourth straight day on Friday, erasing early gains, as the yuan’s rally to a 21-month peak fuelled concerns it could hit exports and the broader economy.
The Chinese currency hit 6.4470 per dollar, gaining nearly 7.8 percent against the greenback so far this year and worrying policymakers.
Apart from ferrous futures, investors also sold off base metals and rubber which tumbled more than 4 percent.
The most-traded iron ore on the Dalian Commodity Exchange closed down 2.8 percent at 534.50 yuan ($83) a tonne after rising as much as 2.1 percent earlier. The contract lost more than 7 percent this week, its second weekly drop.
But traders said physical demand for the steelmaking commodity remained strong despite Beijing’s tighter environmental measures that have led to mill closures.
Stocks of iron ore at China’s ports dropped for a fifth straight week last week, to 133.35 million tonnes, the lowest since May, according to data tracked by SteelHome consultancy. SH-TOT-IRONINV
“Demand for future iron ore cargo is very good and because the renminbi is still appreciating. So traders would like to buy future cargo in dollars, stockpile them and sell them in renminbi,” said a Beijing-based iron ore trader.
China’s iron ore imports rose 2.8 percent from July to 88.66 million tonnes in August, customs data showed.
“Imports will remain high as steel production is still relatively strong, and China’s winter (steel) production cuts won’t come until mid-November,” said Helen Lau, analyst at Argonaut Securities in Hong Kong.
On the Shanghai Futures Exchange, the most-active rebar fell 1.7 percent to 3,916 yuan per tonne, after peaking at 4,038 yuan intraday.
China plans to conduct 15 rounds of inspections during its new campaign to curb smog during winter. The inspections began on Sept. 1 and will continue through March 2018.
The inspections have been part of China’s stricter environmental controls that have led to closures of many steel mills and coal mines producing lower-grade material.
“Any supply cuts led by the government will continue to support steel prices and iron ore will follow,” said the trader.
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB slid 1.6 percent to $75.61 a tonne on Thursday, according to Metal Bulletin, tracking the losses in Chinese futures.
That was the lowest price since Aug. 17 for the spot benchmark, which has lost 4.2 percent so far this week, after an eight-week rally.
$1 = 6.4481 Chinese yuan Reporting by Manolo Serapio Jr.; Editing by Amrutha Gayathri and Biju Dwarakanath