July 31, 2020 / 8:08 AM / 15 days ago

UPDATE 1-Dalian iron ore logs fifth monthly gain on China demand optimism

* Dalian iron ore marks fourth straight weekly gain

* China’s factory activity accelerates recovery in July

* Brazil’s Vale eyes mine expansions, Samarco restart (Updates prices, adds chart)

By Enrico Dela Cruz

MANILA, July 31 (Reuters) - Dalian iron ore futures closed higher on Friday, marking their fifth straight monthly gain, as accelerating factory activity in China further boosted sentiment that was already upbeat on hopes of more government support for its economy.

The Dalian Commodity Exchange’s most-traded iron ore contract ended 1.3% higher at 849.50 yuan ($121.53) a tonne, helping it post a fourth consecutive weekly gain.

The commodity shrugged off expectations for weak steel demand in July, receding supply risks and rising Chinese port stockpiles, with spot prices staying above $100 a tonne near a 12-month high.

Steel futures’ monthly winning streaks also remained unbroken, reflecting optimism about further stimulus measures to sustain China’s post-lockdown economic recovery that is driving steel mills to produce more.

“At present, steel mills are still profitable... and companies have no incentive to reduce production,” analysts at Sinosteel Futures Co Ltd wrote in a note. “The market’s demand expectation... has further strengthened.”

Factory activity in the world’s top metals consumer expanded at a faster rate in July, beating analyst expectations despite disruptions from floods and a resurgence in global coronavirus cases.

Some analysts, however, are sounding a cautionary note.

“We caution that the negative effects from the ongoing Yangtze River floods that may constrain some outdoor construction activity have not been fully felt,” those at Nomura said in a note.

FUNDAMENTALS

* Construction steel rebar on the Shanghai Futures Exchange rose 0.3%, while hot-rolled coil gained 0.9% and stainless steel advanced 1.7%.

* Coking coal rose 1% and coke climbed 1.1%.

* Brazilian iron ore miner Vale SA is looking at further expansion at its Northern System mining complex and expects to restart operations at its Samarco complex in December.

($1 = 6.9902 yuan)

Reporting by Enrico dela Cruz; Editing by Vinay Dwivedi and Uttaresh.V

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