The iron ore in China is expected to have the best week in three in terms of supply

MANILA (Reuters) – Dalian iron ore futures edged up on Friday amid concerns over supplies, which pushed the steel sector to its best week since mid-June although production restrictions in some of China's steel poles have limited production.

The most traded iron ore on the Dalian Commodity Exchange for the September delivery ended the morning session by 0.5% to 877 yuan ($ 127.62) a tonne and was on track to record its fifth consecutive weekly gain. It was up 3.8% from last week's lunch break.

The week, however, was marked by high volatility for the Chinese ferrous complex, with market players constantly focusing on the fundamentals of supply and demand, and after the largest Chinese steel companies asked the government to intervene to stabilize iron ore prices.

Steel producers such as the China Baowu Group, the HBIS Group, the Jiangsu Shagang Group and the Ansteel Group have asked whether "non-market factors" have led to the recent price surge.

The benchmark 62% iron ore benchmark for shipments to China remained stable at $ 119.50 per ton on Thursday, but near the five-and-a-half-year high of $ 126.50 on July 3, showed the data from SteelHome consulting firm.

While iron ore supply remains limited in Chinese ports, the strict limits on steel production – in the towns of Tangshan and Wu'an in the main steel province of Hebei to reduce pollution – have clouded prospects for demand for raw materials.

"Wu'an has imposed production restrictions on 14 steel producers as part of environmental policies from July 1 to August 31. The city will decide on subsequent measures based on air quality, "ANZ said in a note. "This could be a drag on the demand for iron ore."

The lifting of restrictions in Tangshan as scheduled on August 1 will also depend on the quality of the air at that time.

FUNDAMENTALS

* Stocks of iron ore imported into Chinese ports decreased by 18% this year as a result of mine closures in Brazil due to security checks following the deadly collapse of one of the country's mine tailings dams. Vale SA.

* Australia's weather-related supply disruptions have further reduced iron ore shipments to China in recent months.

* Port stocks of iron ore in China reached a record 115.25 million tons at the end of June, before increasing slightly to 115.6 million tons last week, according to data from SteelHome.

* Chinese steel futures contracts fell slightly, the most active contract in steel reinforcing steel bars on the Shanghai Futures Exchange down 0.4% to 3,986 yuan the ton. The hot-rolled coil, the steel used in cars and appliances, fell 0.6% to 3,845 yuan.

* Other steel manufacturing inputs were firmer. Dalian coking coal futures rose 0.8% to 1,399.5 yuan per tonne, while coke was almost unchanged at 2,093 yuan.