Iron ore prices climb, signs of China steel demand pickup

Tue Sep 18, 2012 1:14am EDT

Related Topics

* Iron ore cargoes snapped up as China steel prices rise
    * Without China stimulus, price rebound seen short-lived
    * Australia cuts iron ore export revenue goal on low prices

    By Manolo Serapio Jr
    SINGAPORE, Sept 18 (Reuters) - Spot iron ore prices jumped
on Tuesday as rising steel prices encouraged mills and traders
to chase cargoes, boosting sentiment in a market hit hard by an
economic slowdown in top consumer China.
    Iron ore bounced back from near three-year lows earlier this
month after Beijing's approval of more than $150 billion in
infrastructure projects raised hopes the plan would resuscitate
steel demand. 
    Prices got a further boost from a broad-based commodities
rally spurred by the Federal Reserve's push late last week to
stimulate the U.S. economy.
    A 165,000-tonne cargo of Australian 61-percent grade Pilbara
iron ore fines was sold at $109 per tonne on the China Beijing
International Mining Exchange on Tuesday, up from a previous
deal of $106.23, an iron ore trader in Hong Kong said.
    A separate cargo of 57.7-percent grade Australian Yandi
fines was sold on the same platform at $99 a tonne, up from $95
for a similar grade last week, said a Shanghai-based trader.
    A Brazilian shipment of 63.5-percent grade iron ore was sold
at $111.20 per tonne, up from Monday's $107.41, he said.
    "A lot of the mills have been away from the market for a
while so most of them are just hungry for material. Some traders
are also starting to take positions thinking the market is on a
rebound," the Shanghai trader said.
    Some Chinese mills may also be stocking up on iron ore ahead
of the week-long National Day holiday in China early next month,
traders said.
    Higher prices for spot cargoes could lift the benchmark
62-percent grade iron ore .IO62-CNI=SI further on Tuesday. The
benchmark rose 3.4 percent to $105.10 a tonne on Monday, the
highest since Aug. 21, according to data provider Steel Index.
    
    CAUTION STAYS
    Rising steel prices are largely behind the upbeat tone in
the iron ore market. 
    "Some mills are seeing better demand for some steel products
like hot-rolled coil, cold-rolled coil and strip steel, which
will give them incentive to continue full production. And they
will need more iron ore for that," said another Shanghai-based
trader.
    The price of steel billet in China's key Tangshan area rose
by 120 yuan on the day to 3,120 yuan per tonne on Monday,
traders said. A week ago, the price stood at 2,960 yuan.
    The most-traded rebar for January delivery on the Shanghai
Futures Exchange gained 1 percent to 3,591 yuan by the
midday break, rebounding 12 percent from a record low touched on
Sept. 6.
    But some analysts say it may be too early to declare a
turnaround in the iron ore and steel markets, since the key to
sustaining price gains lies in whether China's steel demand will
recover significantly and only more stimulus steps by Beijing
can make that happen.
    "Iron ore prices will still be under pressure since China
will be cautious in rolling out stimulus right now that there's
a lot of liquidity in global markets, which means it would be
difficult to do it without causing inflation," said Helen Lau,
senior commodities analyst at UOB-Kay Hian. 
    "Given there's probably no strong stimulus going forward in
China, the likelihood that iron ore prices have turned around is
low."
    Reflecting expectations that iron ore prices will stay low,
top exporter Australia cut its revenue forecast for the
steelmaking ingredient by a fifth on Tuesday to A$53.2 billion
($55.9 billion) in this fiscal year. 
    
  Shanghai rebar futures and iron ore indexes at 0437 GMT
                                                                                        
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3591    +37.00        +1.04
  PLATTS 62 PCT INDEX              106.5     +1.25        +1.19
  THE STEEL INDEX 62 PCT INDEX     105.1     +3.50        +3.44
  METAL BULLETIN INDEX            105.75     +1.21        +1.16
                                                                                        
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
    
($1=6.3173 Chinese yuan)
($1=0.9521 Australian dollars)

 (Reporting by Manolo Serapio Jr.;Editing by Clarence Fernandez)
 (manolo.serapio@thomsonreuters.com; +65 6870 3884; Reuters
Messaging: manolo.serapio.reuters.com@reuters.net)
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