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Iron ore resumes decline in tandem with steel on weak demand

Published 22/12/2015, 02:48 pm
© Reuters.  Iron ore resumes decline in tandem with steel on weak demand
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* Dalian iron ore slips from three-week high

* Shanghai rebar comes off five-week peak

By Manolo Serapio Jr

MANILA, Dec 22 (Reuters) - Iron ore futures in China and Singapore resumed their decline on Tuesday after recent gains, underlining the market's fragile sentiment as steel prices remained under pressure amid weak Chinese demand.

Shanghai steel futures came off five-week highs and iron ore in Dalian dropped from Monday's three-week top. Singapore iron ore futures slid nearly 3 percent.

"Unfortunately for the bulls, the overall supply remains high," commodities broker Marex Spectron wrote in a note to clients. "Demand is weak and may well get even weaker before we see an improvement."

Construction activity in China continues to be weak and will only change if lending conditions improve considerably, it said.

The most-traded May iron ore on the Dalian Commodity Exchange DCIOcv1 was down 0.5 percent at 304.50 yuan ($47) a tonne by 0320 GMT. On the Singapore Exchange, January iron ore SZZFF6 fell 2.7 percent to $38.90 a tonne. Both benchmarks have shed more than 16 percent in the past three months.

Construction-used rebar on the Shanghai Futures Exchange SRBcv1 fell 0.9 percent to 1,722 yuan a tonne after peaking at 1,764 yuan earlier in the session, its loftiest since Nov. 16.

A global glut and shrinking Chinese steel demand have pummeled iron ore prices, with the spot rate down 45 percent this year, outpacing declines in oil LCOc1 and copper CMCU3 .

What will spur a recovery in iron ore would be "junior miners getting out of business", said an iron ore trader in Shanghai. "A lot of Chinese steel mills will also die out which will reduce overall production," helping tighten the market, the trader added.

Miners need to cut about 250 million tonnes of iron ore capacity, or 18 percent of current supply, over the next three years to balance the market, Goldman Sachs (N:GS) has said. urn:newsml:reuters.com:*:nL3N1461R4

Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI gained 0.3 percent to $39.40 a tonne on Monday, according to the Steel Index (TSI).

It marked the fourth straight session of increase for the spot benchmark which tumbled to $37 on Dec. 11, its lowest since at least 2008.

Rebar and iron ore prices at 0320 GMT

Contract

Last

Change Pct Change SHFE REBAR MAY6

1722

-15.00

-0.86 DALIAN IRON ORE DCE DCIO MAY6

304.5

-1.50

-0.49 SGX IRON ORE FUTURES JAN

38.9

-1.08

-2.70 THE STEEL INDEX 62 PCT INDEX

39.4

+0.10

+0.25 METAL BULLETIN INDEX

40.46

+0.36

+0.90

Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.4769 Chinese yuan)

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