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Iron ore slips amid demand concerns and prospect of output curbs; HRC futures extend gains
Times:[ 2019-12-13 Author:admin Hit:

Benchmark iron ore futures edged lower on Thursday as concerns resurfaced over demand in top steel producer China, where fresh production curbs loomed in the country's biggest steelmaking region.

China's crude steel output next year is expected to fall to 981 mln tons from a projected 988 mln this year, according to the China Metallurgical Industry Planning and Research Institute.

Steel demand in China is expected to fall 0.6pct to 881 mln tons in 2020, the government consultancy said on Thursday.

Dalian Commodity Exchange's most-traded iron ore contract, with May 2020 expiry, closed down 0.2pct at 651 yuan (USD 92.49) a ton. On the Singapore Exchange, the front-month January 2020 contract was down 0.8pct at USD 92.04 a ton in afternoon trade.

Adding to worries about demand for iron ore, China's northern Hebei province, home to the country's top steelmaking cities, has issued an "orange smog alert" effective from Friday, state-backed Hebei News reported.

Orange smog alerts, the second highest after red in Hebei's three-tier pollution warning system, require companies, including steel mills, to take action to cut emissions and in some cases restrict output amid adverse weather conditions that could worsen pollution.

"With steel demand remaining lacklustre amid rising exports from Brazil and Australia, iron ore was expected to remain under pressure," said Daniel Hynes, senior commodity strategist at ANZ.

A rebound in spot iron ore prices over the past month all the way above USD 90 a ton this week, from less than USD 80 in early November, was thus unexpected, he said.

"China's proactive fiscal policy is having little impact on infrastructure spending, while the manufacturing sector remains weak," Hynes said.

Benchmark spot 62pct iron ore for delivery to China climbed for a third straight day to USD 94.80 a ton on Wednesday, its highest since Sept. 18.

Steel mills enjoying improved margins chased iron ore higher in recent days, optimistic that steel demand would be stronger in 2020, according to ANZ's Hynes.

The most-traded construction steel rebar contract on the Shanghai Futures Exchange edged down 0.1pct. Hot-rolled steel coil rose 1.8pct. Shanghai stainless steel futures rose 0.7pct.