MANILA: China's iron ore futures rose sharply on Friday, with the benchmark contract posting its strongest quarter in nine, after Vale SA slashed its 2019 sales estimate and Rio Tinto declared force majeure on some contracts due to damage from a cyclone.
The May 2019 iron ore contract, the most active on the Dalian Commodity Exchange, rose as much as 4.7 percent to 638.5 yuan ($94.96) a tonne, before ending 3.5 percent higher at 631.5 yuan.
The contract climbed 26 percent in the first quarter of the year, the third biggest quarterly gain since its launch in 2013, having hit its loftiest ever on Feb. 12 at 657.5 yuan in the wake of the Vale dam disaster in January.
Brazil's Vale, the world's biggest iron ore miner, on Thursday estimated selling up to 75 million tonnes less iron ore this year, after several mines were halted following its second deadly dam burst in less than four years.
On Friday, miner Rio Tinto said it issued force majeure notices to some iron ore customers due to damage from tropical cyclone Veronica, which hit Western Australia earlier this week.
"Some market participants and experts had estimated that the reduction could be around 40 million tonnes. So what Vale said about the production cuts was more than market expectations," said metals and mining analyst Helen Lau at Argonaut Securities in Hong Kong.
Under its most optimistic scenario, Vale estimated its 2019 sales would be about 50 million tonnes below its previous forecast. The miner's high-grade ore is favoured by top buyer China, which needs less-polluting raw materials as it seeks to curb air pollution.
Rio said it was assessing the impact of the damage at the Cape Lambert A port facility and working with customers to minimise supply disruption.
"Before, prices were driven by expectations, concerns, worries about supply. But gradually, in reality, the market will really become very tight, and that may support further price rises," Argonaut's Lau said.
ANZ now expects a 10 million tonne deficit in the global iron ore market this year, instead of a 15 million tonne surplus projected earlier.
But it said a "significant" volume of iron ore capacity sat idle in China after some steel mills were closed as authorities try to reduce the overcapacity in the market.
Iron ore inventory at Chinese ports <SH-TOT-IRONINV> hit a six-month high of 148.6 million tonnes as of March 22, according to data tracked by SteelHome consultancy.
Dalian coking coal ended 0.3 percent lower at 1,230.5 yuan a tonne, but coke climbed 1.2 percent to 1,984.5 yuan.
The most active May construction steel rebar contract on the Shanghai Futures Exchange jumped 1.5 percent to 3,758 yuan a tonne, supported by a pick-up in downstream demand. It rebounded with a 10.6 percent quarterly gain, after a 4.2 percent drop in the last quarter of 2018.
Hot rolled coil rose 1.6 percent to 3,741 yuan a tonne.
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