Dalian iron ore marks sixth weekly gain in seven

* China steel mills cautious as iron ore prices soar

* China portside iron ore stocks hit four-month high (Updates prices, adds graphics)

By Enrico Dela Cruz

MANILA, Aug 21 (Reuters) – Iron ore futures eased on Friday, extending losses after a sizzling rally driven by optimism over China’s steel demand, as some industry data showed the country’s portside stockpiles of the steelmaking ingredient climbed to a four-month high.

Iron ore on China’s Dalian Commodity Exchange finished the session down 1.3% at 841.50 yuan ($121.85) a tonne. It rose 1.2% from last week, its sixth weekly gain in seven.

The steelmaking ingredient slipped 1.2% to $122.38 a tonne in afternoon trade on the Singapore Exchange.

Iron ore prices scaled multi-year peaks this week as mills and traders ramped up purchases, expecting China’s economic stimulus to keep demand strong, particularly for construction material rebar.

Supply constraints also supported prices, with the coronavirus outbreak in key producer Brazil hampering miners’ operations.

Traders offered firmer prices on Thursday, unwilling to reduce their margins, prompting mills to adopt a wait-and-see stance, Mysteel consultancy reported.

Some analysts expect a V-shaped economic recovery for China, the world’s top metals producer and consumer, after the pandemic shock.

“(But) a lack of recovery in retail and private investment will continue to put the focus on stimulus to drive growth, which should benefit Australia’s commodity exports,” including iron ore, said Tapas Strickland, an economist at National Australia Bank.

FUNDAMENTALS

* Iron ore prices may extend steep gains in the coming weeks, but rising supplies are set to eventually undermine the rally, analysts said.

* Spot iron ore traded at $126.50 a tonne on Thursday, based on SteelHome consultancy data SH-CCN-IRNOR62. Other industry indexes showed prices closer to or even above $130 a tonne.

* Imported iron ore stocked at China’s ports rose to 117.15 million tonnes this week, the highest since April, SteelHome data showed.

* Rebar on the Shanghai Futures Exchange rose 0.3%, while hot-rolled coil was flat. Stainless steel slipped 0.8%.

* Coking coal gained 1.2% but coke slid 2.6%.