China’s iron ore futures extended gains into a third straight session on Thursday as concerns over supply cuts from Brazil and Australia drove spot prices of the bulk commodity higher, but worries over the coronavirus epidemic capped gains. The Dalian Commodity Exchange’s most-traded iron ore contract, with May expiry, rose as much as 2% to 626.50 yuan ($89.78) a tonne in early trade, its highest since Jan. 23. On the Singapore Exchange, the front-month March contract for the steelmaking raw material gained 0.4% to $86.16 a tonne. Despite weak demand for iron ore in the physical market, spot prices scaled a fresh three-week high on Wednesday, with the benchmark 62% grade climbing to $87 a tonne, SteelHome consultancy data showed. SH-CCN-IRNOR62 That translates to a 4.8% gain so far for this week, after prices dipped to their lowest in nearly three months last week. On Wednesday, Brazilian miner Vale SA reported that the volume of rainfall recorded in Minas Gerais, the country’s iron ore-producing region, was higher than the historical average. “Heavy rain in Brazil has forced Vale to cut its first- quarter guidance on output by 5mt (million tonnes),” commodity strategists at ANZ wrote in a note, while also citing a decline in output from Australia. Costlier raw materials and declining steel prices in China, where the coronavirus epidemic has disrupted economic activity, may squeeze steel mills’ profit margins. “The signs of softer demand for iron ore should limit the upside,” ANZ strategists said. Amid weak downstream demand, the inventory of construction steel rebar in China has piled up to the highest since April 2019, SteelHome data showed. SH-TOT-RBARINV
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