MANILA: Chinese iron ore futures jumped nearly 6 percent in early trade on Wednesday, hitting their daily upside limit, after Brazil's Vale SA said it was cutting output following a deadly tailings dam disaster.
The world's largest iron ore miner said it would take as much as 10 percent of its ore output offline in order to decommission 10 more dams similar to the one that burst last week, killing scores of workers and nearby residents.
The most traded iron ore on the Dalian Commodity Exchange rose to 589 yuan ($87.51) a tonne, the highest since early September 2017, immediately after trading began, up from Tuesday's close of 556 yuan.
The disaster has created uncertainty for China's iron ore market at a time when demand for supplies from the Brazilian producer is rising, traders say.
Vale is the world's top supplier of low-aluminium iron ore, preferred for its low impurity level by Chinese steel mills to help them meet pollution targets as part of the country's anti-smog campaign.
Chief Executive Fabio Schvartsman said Vale would temporarily paralyze operations using the dams to be decommissioned, and spend 5 billion reais ($1.3 billion) to decommission them over the next three years.
Analysts said safety inspections of Vale's facilities will likely get tougher in coming months, slowing down its operations or even further reducing output.
"Bulk commodity markets remained on edge as supply-side issues dominated discussions," ANZ Research said in a note. "There are increasing concerns that a new investigation into the safety of all tailing dams in Brazil will lead to further closures."
China's steel futures and prices of other steel-making ingredients also rose.
The most-active rebar contract on the Shanghai Futures Exchange was up 2 percent at 3,747 yuan a tonne by 0121 GMT. Hot rolled coil climbed 1.7 percent to 3,640 yuan.
Dalian coking coal gained 0.6 percent to 1,220 yuan a tonne while coke advanced 1.5 percent to 2,059 yuan following recent falls.
Spot iron ore for delivery to China <SH-CCN-IRNOR62> was steady at $78.80 a tonne on Tuesday, according to SteelHome consultancy.
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