UPDATE 1-China steel, iron ore at 1-month top on demand rebound

Wed Sep 19, 2012 3:52am EDT

Related Topics

* Higher China steel prices behind recovery in iron ore
    * Steel mills restocking ahead of China holiday
    * BHP Billiton: Iron ore prices unlikely to repeat previous
highs

 (Adds Bank of Japan, updates rebar price)
    By Manolo Serapio Jr
    SINGAPORE, Sept 19 (Reuters) - Shanghai rebar futures hit
one-month highs on Wednesday on signs of a pickup in steel
demand in top market China, prompting mills to restock iron ore
and supporting prices of the steelmaking ingredient that fell by
a quarter in August.
    Iron ore prices rebounded from their lowest level in almost
three years earlier this month after Beijing's approval of more
than $150 billion in projects to build highways, ports and
airport runways boosted the outlook for steel demand.
    The most briskly traded rebar contract for January delivery
on the Shanghai Futures Exchange closed up 1.6 percent
at the session's high of 3,638 yuan ($580) per tonne, its
loftiest since Aug. 17.
    The Bank of Japan's move to boost its asset-purchase
program, following similar measures in the United States and
Europe, also boosted sentiment in rebar and other commodity
futures and equities.  
    Rebar, used in construction, has now gained more than 13
percent since hitting a record low on Sept. 6.
    Spot steel prices in China are rising as well, with steel
billet in Tangshan in top steel producing Hebei province
advancing another 60 yuan on Tuesday to 3,180 yuan a tonne,
climbing more than 7 percent in just over a week.
    Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI rose 4.3 percent to $109.60 a tonne on Tuesday,
also the highest since Aug. 17, based on data from information
provider Steel Index. 
    "The rapid increase in steel and iron ore prices is
motivating traders to move into the market and take on cargo,"
said a Hong Kong-based iron ore trader.
    "It's all about sentiment. Traders who earlier lost big time
will want to take the opportunity to ride the market."
    
    
    RESTOCKING     
    For a third straight day on Wednesday, price offers for
imported iron ore cargoes in China rose as sellers try to unload
cargoes at better prices after many suffered losses during a
market rout over the past two months. 
    Price offers for Australian, Brazilian and Indian cargoes
rose another $4-$5 a tonne, traders said. 
    Chinese mills are also replenishing iron ore inventory
before prices go even higher, ensuring they have enough stocks
ahead of the week-long National Day holiday in China next month,
said a trader in Shanghai.
    "I heard some mills are back to buying cargoes on long-term
contracts because current spot prices are quite high," said the
Hong Kong trader.
    Prices for long-term contracts are usually based on the
average of spot rates for the current month. Iron ore prices
have averaged about $95 so far this month, after falling to
$86.70 on Sept. 5, the lowest since October 2009.
    But some traders are wary about the sustainability of the
upturn in steel prices.
    "I haven't really seen any strong increase in real demand
for steel, so I'm not sure whether this rally in steel prices
will last," said another Shanghai trader. 
    BHP Billiton , the world's biggest miner,
said it does not expect a repeat of the "spectacular imbalance"
between steel supply and demand in China that propelled iron ore
prices to a record high above $190 last year. 
    BHP last month shelved its planned $20 billion copper and
gold mine Olympic Dam expansion in Australia and put all other
approvals on hold amid escalating development costs, slumping
prices and an uncertain outlook.
    
  Shanghai rebar futures and iron ore indexes at 0738 GMT
                                                                                      
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3638    +56.00        +1.56
  PLATTS 62 PCT INDEX                111     +4.50        +4.23
  THE STEEL INDEX 62 PCT INDEX     109.6     +4.50        +4.28
  METAL BULLETIN INDEX            110.17     +4.42        +4.18
                                                                                      
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.3189 Chinese yuan)

 (Editing by Himani Sarkar)
 (manolo.serapio@thomsonreuters.com; +65 6870 3884; Reuters
Messaging: manolo.serapio.reuters.com@reuters.net)
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