June 4, 2018 / 7:20 AM / in 3 months

UPDATE 1-Dalian iron ore falls on lean steel prices, record port stocks

* Iron ore stocks at China ports hit 161.98 mln tonnes

* Shanghai rebar drops after hitting 3-month high on Friday (Adds China’s pollution meeting, updates prices)

By Manolo Serapio Jr

MANILA, June 4 (Reuters) - Chinese iron ore futures dropped nearly 2 percent on Monday as steel prices retreated and stockpiles of the steelmaking raw material at China’s ports surged to record levels.

Iron ore stocked at China’s major ports reached 161.98 million tonnes on Friday, up 1.4 million tonnes from the previous week, data tracked by SteelHome consultancy showed. The inventories have risen 9 percent this year. SH-TOT-IRONINV

Some cities in China’s Hebei and Jiangsu provinces have imposed industrial production restrictions, including on steel mills, to fight smog, and that is affecting the drawdown of iron ore at China’s ports, said a Shanghai-based trader.

“These production interruptions have affected mills’ ability to take cargoes from the ports,” the trader said.

The most-traded iron ore, for September delivery, on the Dalian Commodity Exchange closed down 1.6 percent at 457 yuan ($71) a tonne, after earlier falling as far as 455 yuan.

China’s environment ministry has criticised senior officials from three cities for failing to fix serious pollution problems, in Beijing’s latest attempt to name and shame regional governments for persistent environmental violations.

Weaker futures could pull down bids for physical iron ore cargoes, traders said. Spot iron ore for delivery to China’s Qingdao port .IO62-CNO=MB stood at a one-week high of $66.16 a tonne on Friday, according to Metal Bulletin. The spot benchmark ended May nearly flat versus the previous month.

Softer steel prices also weighed on iron ore. The most-active rebar on the Shanghai Futures Exchange ended 0.5 percent lower at 3,719 yuan a tonne.

The construction steel product touched a nearly three-month peak of 3,778 yuan on Friday, spurred by a sustained drop in traders’ stockpiles that pointed to firm consumption.

Coke slid 3.5 percent to 2,025 yuan a tonne and coking coal dropped 1.2 percent to 1,238.50 yuan. ($1 = 6.4152 Chinese yuan) (Reporting by Manolo Serapio Jr., Editing by Joseph Radford and Sherry Jacob-Phillips)

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