Iron ore extends gains as Vale halts Viga plant operations

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Iron ore futures rose on Tuesday after miner Vale S.A. said it was suspending operations at a concentration plant in Brazil, though trading was subdued as market activity winds down ahead of China’s Oct. 1-8 National Day holidays.

The steelmaking ingredient’s most-traded January 2021 contract on China’s Dalian Commodity Exchange closed 1.4% higher at 780.50 yuan $114.47) a tonne, rising for a second straight session.

Iron ore for October delivery on the Singapore Exchange climbed 1.1% to $115.75 a tonne by 0707 GMT, extending gains into a fourth session.

The suspension of operations at Vale’s Viga concentration plant following a court order will reduce its iron ore fines output by 11,000 tonnes per day.

“The supply disruption could provide short-term support to the market, which has eased from the six-year highs (touched) earlier this month,” commodity strategists at ING said in a note.

Support for iron ore is also seen from top steel producer China’s demand particularly for construction products, which has been boosted by the government’s infrastructure-focused stimulus measures.

“We anticipate Chinese construction steel demand, particularly for rebar, will remain seasonably robust through October and November,” said analysts at research house Navigate Commodities in Singapore.

However, such support may wane in the last quarter as worries about iron ore supply to China are subsiding, with the country’s iron ore stockpiles at ports hitting a six-month high, according to SteelHome consultancy.

“Combined supplies from Australia and Brazil are still expected to exceed 100mmt (million tonnes) this month by our estimates, which may add further to port inventories,” said Howie Lee, an economist at OCBC Bank in Singapore.

Rebar on the Shanghai Futures Exchange gained 0.1%, while hot-rolled coil added 0.2%. Stainless steel slipped 0.4%.

Coking coal climbed 1.6% and coke advanced 2.3%.

Source: Reuters

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