Chinese iron ore futures steadied on Tuesday, surrendering early gains, as concerns over tighter supply after BHP Billiton suspended all its iron ore rail operations in Western Australia were offset by a slide in steel prices.
The world's No. 3 iron ore supplier made the decision after a train, loaded with iron ore, at BHP’s Mount Newman railway line ran away at high speed for nearly 100 km (62 miles) before being forcibly derailed.
BHP has four processing hubs and five mines in the Pilbara region of northern Western Australia, connected by more than 1,000 km of rail infrastructure and port facilities.
The most-traded January iron ore on the Dalian Commodity Exchange closed 0.1 percent lower at 510 yuan ($74) a tonne after rising as much as 1.7 percent intraday.
BHP did not say how long the iron ore rail operations will be suspended, but ANZ analysts said the miner “does have a substantial stockpile at the port that it will be able to utilise.”
“We expect this incident will lead to the rebound in iron ore prices, which are also already well supported by declining port inventory in China,” said Argonaut Securities analyst Helen Lau.
Stocks of iron ore at China's major ports stood at 141.65 million tonnes on Nov. 2, nearly 13 percent below a record high in early June, data tracked by SteelHome consultancy showed. SH-TOT-IRONINV
Iron ore imports by China, the world's top buyer, have largely been resilient this year, with January-September shipments reaching 803.34 million tonnes, down only 1.6 percent from a year earlier.
Imports of the steelmaking raw material remained strong as Chinese mills churned out record production to cash in on strong profit margins.
The most-active January rebar on the Shanghai Futures Exchange fell 1.9 percent to settle at 3,962 yuan a tonne, having touched a nearly one-month low of 3,953 yuan earlier in the session.
The chairman of top Chinese steel producer Baowu Steel said China's steel production will exceed 900 million tonnes this year.
That would beat last year's record of 831.73 million tonnes, with mills ramping up output to cash in on strong profit margins.
Coking coal was little changed at 1,370 yuan per tonne and coke jumped 1.3 percent to 2,408.50 yuan.