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Iron ore prices rise on improved China steel margins, supply concerns

Published 20/04/2021, 02:56 pm
© Reuters.
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* Dalian iron up for 4th session, SGX iron ore up for 5th day

* Spot 62% iron ore hits highest since 2011 - SteelHome data

* Rio's Q1 iron ore output falls 2% on labour shortage, weather

* Vale's Q1 iron ore output down 19.5% versus previous quarter

By Enrico Dela Cruz

April 20 (Reuters) - Iron ore prices rose on Tuesday, extending gains spurred by improved steel profit margins in top steel producer China, and with disappointing output figures from major miners Rio Tinto (LON:RIO) and Vale adding fuel to the steelmaking ingredient's rally.

September iron ore on China's Dalian Commodity Exchange DCIOcv1 was up 2.1% at 1,084.50 yuan ($166.95) a tonne by 0330 GMT, rising for a fourth consecutive session.

Iron ore's front-month May contract on the Singapore Exchange SZZFK1 climbed 1.4% to $178.80 a tonne, up for a fourth straight session.

"Incredibly healthy Chinese steel margins, which have burst through RMB1,000/t, have been the real driving force behind iron ore's move higher over the past week," said Atilla Widnell, managing director at Navigate Commodities in Singapore.

Strong steel prices encouraged Chinese steel mills to continue ramping up output, boosting demand for iron ore.

Brisk demand pushed the spot price for the benchmark 62% iron ore grade to $181.50 a tonne on Monday, the highest since 2011, based on SteelHome consultancy data. SH-CCN-IRNOR62

Rio Tinto Ltd's RIO.AX iron ore output in the March quarter dropped 2% on an annual basis, while production at Brazil's Vale SA VALE3.SA fell in the same period by 19.5% from the previous quarter. will thus need to ramp up production significantly in coming quarters to meet its 2021 output guidance 315-335 million tonnes.

The iron ore market has kept a wary eye on the still-tight global supply in the wake of a Vale tailings dam burst in 2019 that had prompted mine closures for safety checks in Brazil.

But for Widnell, quarterly production reports are "a non-event" because real-time shipping data are available and more indicative of the supply situation.

Construction steel rebar on the Shanghai Futures Exchange SRBcv1 slipped 0.1% while hot-rolled coil SHHCcv1 dropped 0.5%.

Shanghai stainless steel SHSScv1 shed 0.1%.

Dalian coking coal DJMcv1 slumped 2% but coke DCJcv1 advanced 0.5%.

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