China's iron ore futures rose on Tuesday after Vale SA, the world's largest iron ore miner, lowered its production outlook for the steelmaking raw material.
The most-traded iron ore contract on the Dalian Commodity Exchange, expiring next month, closed up 1.7% at 651.50 yuan ($92.56) a tonne. It rose as much as 2.2% during the session.
On the Singapore Exchange, the front-month January contract erased early gains and was down 0.4% by 0703 GMT.
Vale said on Monday it would slash output from its Brucutu mine in Brazil for up to two months as it evaluates the stability of the nearby Laranjeiras dam, leaving the mine operating at just 40% of normal capacity.
As a result, Vale lowered its production outlook for the first quarter of 2020 to a range of 68 million tonnes to 73 million tonnes from a previously-announced range of 70 million tonnes to 75 million tonnes.
The revised outlook comes at a time when iron ore inventory at ports in China, the world's biggest steel producer, has slumped to the lowest in nearly 10 weeks, while steel demand remains firm amid Beijing's policy support for the slowing economy.
"As (China's) winter production control is less severe than last year and steel demand remains solid due to government's support policies, we expect steel prices to rise further, underpinning further recovery in iron ore and coking coal prices," said Helen Lau, an analyst at Argonaut Securities.
Still, Vale expects its production to steadily recover between 2020 and 2022 from a sharp drop following a deadly dam burst early this year.
Imported iron ore stocks at Chinese ports fell for a third straight week to 129.40 million tonnes, as of Nov. 29, the lowest since late-September, based on data tracked by SteelHome consultancy.
Iron ore exports by Brazil, China's main source of high-grade material, reached 27.25 million tonnes in November, down from 33.35 million tonnes in October.
Benchmark 62% iron ore's spot price dropped to $88.50 a tonne on Monday from Friday's $89.00, SteelHome data showed.
The most-traded construction steel rebar contract on the Shanghai Futures Exchange was down 0.2%, while hot-rolled steel coil edged up 0.1%.
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