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Iron ore heads for steep weekly fall after wild swings

Published 10/07/2015, 02:30 pm
© Reuters.  Iron ore heads for steep weekly fall after wild swings

* Down nearly 11 pct on week after drop to decade-low

* Weak fundamentals to keep prices low - Argonaut

* Shanghai rebar jumps 4.8 pct on Friday, tracks equities

By Manolo Serapio Jr

MANILA, July 10 (Reuters) - Iron ore is set to end the week sharply down for a second straight week after getting swept by the sharp fall and eventual rebound in Chinese stocks, while abundant supply is likely to keep the raw material under pressure.

Iron ore was the hardest hit in this week's selloff, pushing the steel-making commodity back to a bear market as sellers latched on to the panic that gripped Chinese equities.

"Once the volatility comes down, the price will reflect the real fundamentals which are weak," said Helen Lau, an analyst with Argonaut Securities in Hong Kong.

Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI climbed 9.5 percent to $48.30 a tonne on Thursday, after tumbling 11.3 percent the day before, according to The Steel Index (TSI).

It was the biggest single-day drop and rise for the spot benchmark since TSI began tracking it in late 2008, as iron ore, along with other commodities, moved in tandem with Chinese shares.

For the week, iron ore has lost 10.7 percent so far, after dropping 10.9 percent last week.

Chinese stocks rose sharply for a second session on Friday after Beijing moved to arrest a market rout, with the securities regulator banning shareholders with large stakes in listed firms from selling. ID:nL3N0ZQ179

Iron ore fell as far as $44.10 a tonne this week, the lowest on record since TSI began compiling the data. Based on annual pricing that preceded the current spot-based system, it was the lowest since 2005, according to data compiled by Goldman Sachs.

"This week's price collapse did invoke concern among some producers that supply may have to be curtailed if they remain at these levels," ANZ analysts said in a note.

"However, the rally was clearly sentiment-driven as a rebound in Chinese equity markets eased concerns over underlying demand."

Iron ore futures in China continued to recover on Friday, with the most-traded September contract on the Dalian Commodity Exchange DCIOcv1 up 1.4 percent at 368.50 yuan ($59) a tonne by the midday break. It rallied as much as 8 percent on Thursday.

Steel futures outperformed, with the October rebar contract on the Shanghai Futures Exchange SRBcv1 up 3.2 percent at 2,038 yuan per tonne, after rising nearly 5 percent earlier.

($1 = 6.2087 Chinese yuan)

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