January 21, 2019 / 8:20 AM / in 2 months

UPDATE 1-China's iron ore hits over 10-1/2-month peak on strong demand

* Iron ore rises as much as 3.2 pct; rebar at 11-wk high

* China Dec daily crude steel output lowest since March

* China 2018 crude steel output at record high (Updates with closing prices)

By Enrico Dela Cruz

MANILA, Jan 21 (Reuters) - China’s iron ore futures rose on Monday to their highest since March 2018, extending gains on expectations of increased demand as the country’s steel inventories fell, and hopes that Beijing will roll out more economic stimulus measures.

Steel futures held on to their gains after data showed last month’s average daily steel output of China, the world’s biggest steel maker, hit its lowest level since March as producers cut output amid shrinking profit-margins.

The most traded iron ore contract on the Dalian Commodity Exchange closed 2.2 percent higher at 533 yuan ($78.53) a tonne, after rising as much as 3.2 percent to 538 yuan early in the session, the highest since March 2, 2018 when it hit the same level.

Spot iron ore for delivery to China SH-CCN-IRNOR62 slipped 1.1 percent to $74.80 a tonne on Monday, having gained 0.7 percent to $75.60 in the previous session, according to SteelHome consultancy.

“Our sintering data analytics model is seeing a pick up in (iron ore) utilization over the last two weeks,” said Darren Toh, a data scientist with Singapore-based steel and iron ore data analytics company Tivlon Technologies.

Utilization of the steel-making raw material is expected to continue inching up over the next 10 weeks in China, Toh said, adding, he expected authorities to relax anti-pollution measures in the first half of the year.

Sintering is a highly polluting process that melts iron ore as a prelude to making steel.

The government, however, pledged to continue with a crackdown on air pollution that has weighed on the industrial sector, including steel producers, despite a cooling Chinese economy.

Analysts said hopes are high that the government will unveil more fiscal stimulus during the annual parliament meeting in March, including bigger tax cuts and more spending on infrastructure projects.

The most-active rebar contract on the Shanghai Futures Exchange was up 1.4 percent at 3,645 yuan a tonne, its highest since early November. Hot rolled coil edged up 0.6 percent at 3,515 yuan.

Tokyo Steel Manufacturing Co Ltd, Japan’s top electric-arc furnace steelmaker, said on Monday it would hold steel product prices steady in February because of a weaker overseas market.

But steel markets in China and Southeast Asia may pick up after the Lunar New Year holidays in early February, Tokyo Steel Managing Director Kiyoshi Imamura told reporters at a briefing.

Prices of other steel-making raw materials, however, were lower, with coking coal down 1.9 percent at 1,214 yuan a tonne and coke losing 1.1 percent 2,030 yuan.

China’s December coal output climbed 2.1 percent from the year before, hitting the highest level in at least three years as major producers ramped up production amid robust winter demand and after the country started up new mines.

($1 = 6.7873 yuan)

Reporting by Enrico dela Cruz; Editing by Shreejay Sinha and Rashmi Aich

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