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China iron ore futures soar before new buying limits go into effect

Published 21/08/2017, 01:31 pm
© Reuters.  China iron ore futures soar before new buying limits go into effect
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* Iron ore, coking coal and coke climb before bourse's curbs on speculation go into effect

* High-grade iron ore will be in shortage until mid-September -analyst

* Steel mills churn out production ahead of winter

BEIJING, Aug 21 (Reuters) - China's iron ore futures rose for a third day on Monday, soaring more than 6 percent, fuelled by concerns of shortages of high-grade iron ore and before curbs on futures purchases come into force.

The Dalian Commodities Exchange on Friday said it will limit the daily purchases and sales of contracts for delivery in January DCIOF8 and February DCIOG8 to 6,000 lots since Tuesday. The January contract is currently the most active iron ore future on the exchange. Each lot is 100 tonnes of ore. methods cannot change the imbalanced supply and demand situation," said Wang Yilin, analyst at Sinosteel Futures.

The most-active iron ore futures DCIOcv1 on the Dalian Commodities Exchange climbed 6.8 percent to 597 yuan ($89.53) a tonne by 0302 GMT on Monday. The contract rose as high as 598.5 yuan, the highest level since March 21 this year.

Iron ore futures have climbed 13.7 percent over the past three sessions, the biggest three-day percentage gain since the three days ending Nov. 25, 2016.

Mills are churning out steel products with high-grade iron ore ahead of production curbs that are set to start before the beginning of the northern hemisphere winter.

China's top steel producing province Hebei said earlier this month it will impose capacity limits on steel mills in three cities, including city of Tangshan, during the winter season in an effort to tackle pollution.

The province also vowed last week to fulfil its capacity-cutting targets for this year in steel, cement, coal and glass by the end of September. on long- and flat-products are good at mills, which supports them to keep full-load operation and purchase more raw materials even prices are hiking," said a supply manager at state-backed steel firm in Henan.

Analysts estimated that profits on steel products are now 600 to 1,000 yuan a tonne.

"It is unlikely to see the supply gap on high-grade iron ore to be filled until the middle of September, when the September contract approaches delivery," said Wang.

"No one wants to deliver at current price level."

The most-traded rebar futures SRBcv1 on the Shanghai Futures Exchange rose more than 4.1 percent at 3,981 yuan a tonne.

Spot rebar prices rose 0.3 percent to 4,243.04 yuan a tonne on Friday, according to data on the Mysteel website.

Other raw materials also followed iron ore higher. The January coking coal contract DJMcv1 rose 2.9 percent to 1,509 yuan a tonne.

Coke futures on the Dalian Commodities Exchange rose 3.6 percent to 2,329.5 yuan a tonne.

The exchange also said on Friday that it will adjust the margins on coking coal and coke to 12 percent from Tuesday.

($1 = 6.6680 Chinese yuan renminbi)

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