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Dalian iron ore gains, more China arrivals may cap rise

Dalian iron ore futures jumped more than 1 percent on Monday, extending modest gains from last week as some Chinese mills continued to replenish stockpiles amid limited availability of some cargoes.

But expectations of more cargoes arriving at Chinese ports this week and a weak steel market could stall further gains in the price of the raw material, traders said.

The most traded September iron ore contract on the Dalian Commodity Exchange was up 1.3 percent at 425.50 yuan ($69) a tonne after touching a one-week high of 427.50 yuan.

“The availability of some spot cargoes is not matching demand currently and a lot of mills are running low on inventory,” said a Shanghai-based iron ore trader.

“But I heard from port agents that more vessels are coming this week so this shortage may be temporary.”

Weaker steel demand in China, which prompted some large producers to curb output early this month, is also a risk for iron ore prices.

The average daily crude steel output of China’s large steelmakers fell 1.2 percent to 1.768 million tonnes in May 1-10 after climbing for three consecutive 10-day periods, data from the China Iron and Steel Association showed on Friday.

Steel inventories held by major steel firms increased to 15.87 million tonnes during the period from 14.96 million in the last 10 days of April.

The drop in steel output “signals the potential end to a rising trend since November 2014 and highlights softer steel demand in the first half of this year”, ANZ Bank said in a note, adding that could exert pressure on iron ore prices in the near term.

Iron ore for immediate delivery to China’s Tianjin port .IO62-CNI=SI jumped 4 percent to $59.90 a tonne on Friday, according to The Steel Index.

China’s slowing economy has hit industrial demand, with steel consumption continuing to shrink in the first quarter of this year after contracting in 2014 for the first time in three decades.

The most traded October rebar contract on the Shanghai Futures Exchange was steady at 2,342 yuan a tonne but not far from a four-week low of 2,302 yuan reached last week.
Source: Reuters