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Iron ore tumbles as demand worries fuel four-day sell-off

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10/17/2019 | 05:29am EST

MANILA (Reuters) - Benchmark Dalian iron ore futures extended losses into a fourth consecutive session on Thursday to hit seven-week lows, on fears that demand for the steelmaking raw material will be hurt further by a bruising U.S.-China trade war.

Trade tensions between the United States and China, the world's two largest economies, are a significant risk for the global economy, with "real spillover effects" for emerging markets, top IMF officials said on Wednesday.

Steel demand in top consumer and producer China is forecast to grow by just 1% next year, compared with this year's projected 7.8%, according to the World Steel Association, which blamed the trade conflict.

Global steel demand growth will slow to 1.7% in 2020, from 3.9% forecast this year, the Belgium-based group said.

"The negative news flow is certainly dragging iron ore prices lower," Argonaut Securities metals and mining analyst Helen Lau said.

Dalian Commodity Exchange's most-traded iron ore contract, with January 2020 expiry, ended down 2.2% at 615 yuan a tonne, after falling as much as 4% to its weakest since Sept. 2 earlier in the session.

On the Singapore Exchange, the front-month November contract slipped as much as 1.9% to its lowest since late August.

Prices of spot cargoes of benchmark iron ore with 62% iron content for delivery to China <SH-CCN-IRNOR62> fell to $89.50 a tonne on Wednesday, the lowest since Sept. 2, from Tuesday's $91.50, based on SteelHome consultancy data.

Two of the world's biggest iron ore miners, Vale and Rio Tinto, this week reported higher quarterly output and shipments, sending signals that global production had largely stabilised.

"If iron ore production continues to improve, that is also an additional concern," Lau said.

In January, a deadly mine tailings dam collapse in Brazil prompted dam and mine shutdowns for safety checks in the country, squeezing global iron ore supply and pushing prices to five-year highs in July.

Some developments, however, offer a silver lining, Lau said, with U.S. President Donald Trump saying he expected to sign the first phase of a trade deal with Chinese President Xi Jinping next month.

Spot iron ore prices tumble https://fingfx.thomsonreuters.com/gfx/mkt/12/7485/7416/Spot%20iron%20prices%20tumble.png

FUNDAMENTALS

BHP Group Ltd, the world's biggest miner, posted a slight dip in its September quarter iron ore production due to planned maintenance at a key port, but maintained its fiscal 2020 iron ore production forecast.

Tighter steel production restrictions for winter under China's anti-pollution campaign added to concerns about future demand for iron ore and other steelmaking raw materials.

On the Shanghai Futures Exchange, construction steel rebar and hot-rolled steel coil ended almost flat at 3,324 yuan and 3,312 yuan, respectively, after a two-day fall.

Dalian coking coal edged up 0.9%, but Dalian coke inched down 0.3%.

Stainless steel, made from nickel pig iron, slumped 2.1% to 15,180 yuan a tonne, tracking losses in Shanghai and London nickel prices.

(Reporting by Enrico dela Cruz; Editing by Amy Caren Daniel and Dale Hudson)

By Enrico Dela Cruz

Stocks mentioned in the article
ChangeLast1st jan.
BHP GROUP -0.61% 37.24 End-of-day quote.9.47%
EURO / BRAZILIAN REAL (EUR/BRL) -0.02% 4.6396 Delayed Quote.5.22%
LME NICKEL CASH -1.93% 14475 End-of-day quote.38.65%
RIO TINTO GROUP -0.83% 94.41 End-of-day quote.21.32%
RIO TINTO PLC -2.29% 4117.5 Delayed Quote.12.99%
SILVER -0.57% 17.08 Delayed Quote.10.25%
SINGAPORE EXCHANGE LIMITED 0.00% 8.86 End-of-day quote.23.06%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.11% 7.03996 Delayed Quote.2.23%
VALE S.A. 1.18% 48.17 End-of-day quote.-6.29%
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