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China iron ore, steel retreat after six-day rally, but off lows

Published 09/12/2016, 02:54 pm
Updated 09/12/2016, 03:00 pm
© Reuters.  China iron ore, steel retreat after six-day rally, but off lows

* Bullish sentiment seen intact as Chinese futures bounce off lows

* Iron ore seen skewed to the upside over next 12 months - ANZ

By Manolo Serapio Jr

MANILA, Dec 9 (Reuters) - Iron ore and steel futures in China edged lower on Friday as investors locked in gains after a six-day rally anchored on firm demand and Beijing's bid to address a steel glut.

But prices of both commodities came off session lows, suggesting the bullish market sentiment was largely intact.

China has been cracking down on mills producing low-quality steel, those expanding operations illegally and those aggravating the country's pollution problem, helping tighten supply at a time when some traders are replenishing stocks in anticipation of demand staying strong through next year.

The most-active rebar on the Shanghai Futures Exchange SRBcv1 was down 0.1 percent at 3,359 yuan ($487) a tonne by midday, but well off the day's low of 3,213 yuan.

The construction steel product has gained 7 percent for the week so far after touching a 31-month peak on Wednesday.

Iron ore on the Dalian Commodity Exchange DCIOcv1 was down 2.1 percent at 621.50 yuan per tonne, having fallen more than 6 percent earlier. The steelmaking raw material hit a nearly three-year high on Thursday and has also gained 7 percent this week.

Data on Thursday showed China's iron ore imports jumped in November to the third highest on record at nearly 92 million tonnes. think the likelihood of a sustained downturn in iron ore prices looks increasingly unlikely, with risks skewed to the upside over the next 12 months," Daniel Hynes, commodity strategist at ANZ Bank, wrote in a report.

"A combination of seasonally strong steel demand in China and risks of further supply disruptions could see the market enter a period of tightness in the second half of 2017, which should support prices."

The strength in futures this week propelled spot iron ore back above $80 a tonne to the highest since October 2014. Iron ore for delivery to China's Qingdao port .IO62-CNO=MB stood at $81.78 a tonne on Thursday, a day after touching a two-year high, according to Metal Bulletin. It has risen over 5 percent ths week.

($1 = 6.8995 Chinese yuan)

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