Dalian iron ore prices surged on Thursday, breaking a three-day decline on renewed concerns about tightening supply of the raw material, while steel futures rallied for a seventh straight session amid output cuts intended to curb pollution in China. The most-active September iron ore contract on the Dalian Commodity Exchange jumped as much as 4.1% to 828 yuan ($120.38) a tonne, moving closer to a 837 yuan-a-tonne record touched on June 20.
Market participants were mainly focused on the dwindling stockpiles at Chinese ports, which are at their lowest since the start of 2017, said a trader at Itochu (China) Holding Co Ltd in Beijing. Worries over tightness, which lifted spot iron ore prices to five-year highs last week, eased earlier this week after Brazilian miner Vale SA resumed full operations at its Brucutu mine, according to analysts.
Vale, the world's No. 1 iron ore producer, has suspended some mining operations in Brazil for safety checks following a deadly tailings dam burst in January, curbing supply to top steel producer China. "While the Brucutu restart will help boost supply, shipping the additional volumes from Brazil to China could take about 45 to 60 days," the Itochu trader said.
Operational issues facing Australian iron ore producers are also adding to worries about supply, the trader said. Rio Tinto Ltd , for instance, has lowered its guidance on iron ore volumes it expects to ship from the key Pilbara region in Australia for the third time since April, citing operational problems.
"We expect (spot) iron ore's prices by end of the year to remain much higher than last year's average of $70 per tonne," the Itochu trader said. The price of spot 62% iron ore grade for delivery to China was at $116.50 a tonne as of Wednesday, holding near five-year highs, data from SteelHome consultancy showed. Higher steel prices, underpinned by output curbs in China's top steelmaking city of Tangshan and elsewhere, also provided a boost to iron ore.
The most-active October steel rebar contract on the Shanghai Futures Exchange climbed as much as 2.8% to 4,095 yuan a tonne, its highest since February 2011. Hot rolled coil, steel used in cars and home appliances, advanced by as much as 2.1% to an all-time high of 3,998 yuan a tonne. Other steelmaking raw materials also traded higher. Dalian coking coal futures were up as much as 1.4% at 1,402 yuan a tonne. Coke futures were up 0.7% at 2,118 yuan.
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