UPDATE 1-Iron ore hit by weak Chinese demand, poor steel outlook

Tue Sep 25, 2012 3:24am EDT

Related Topics

* Iron ore drops despite firmer steel prices
    * Price offers for imported cargoes to China down for 3rd
day
    * China iron ore inventory at over 97 mln tonnes last week

 (Updates rebar price)
    By Manolo Serapio Jr
    SINGAPORE, Sept 25 (Reuters) - Sellers of imported iron ore
cargoes to top buyer China cut prices for a third day on Tuesday
as weak demand pushed the benchmark rate to a one-week low, as
the near-term outlook for the steel market remained weak despite
recent gains.
    Price offers for iron ore from Australia, Brazil and India
dropped by another $1-$2 per tonne, according to Beijing-based
consultancy Umetal.
    That followed a 2.5 percent fall in the benchmark 62-percent
grade iron ore .IO62-CNI=SI to $103.70 per tonne on Monday,
the weakest since Sept. 14, based on data from information
provider Steel Index.
    Iron ore has recovered from a near three-year low of $86.70
reached earlier this month, on hopes that China's approval of
more than $150 billion worth of infrastructure projects would
boost steel demand.
    But the rebound has since been curtailed by signs end-user
demand for steel in China, the world's biggest consumer and
producer, remains weak despite a recent spike in steel prices.
    "Inquiries are very limited. It looks like most mills are
done with restocking ahead of the holidays," said an iron ore
trader in Shanghai.
    The Chinese usually restock raw materials ahead of long
public holidays, including next week's National Day break,
although many mills may have replenished enough at this point.
    A Brazilian cargo of 65.14-percent grade iron ore was sold
on Monday at $114.50 per tonne, down $2 from the previous sale
of a similar grade, while a 63.6-percent grade Brazilian
shipment was sold about a dollar lower at $105.10, traders said.
    Iron ore stockpiles at major Chinese ports stood at 97.25
million tonnes at the end of last week SH-TOT-IRONINV, up half
a percent from the week before, equivalent to about 1-1/2 months
of China's imports.
    The rebound in iron ore prices earlier this month had
prodded some traders to snap up cargoes, hoping to recover from
losses in the last two months following a market rout that
sliced spot prices by more than a third.
    But some have remained cautious, with China's steel demand
staying sluggish.
    "We have not bought cargoes for two months now because we
are not sure about the future of the steel market. We don't want
to take the risk of buying a cargo that can't be easily sold
these days," said a shipping manager for an iron ore trading
firm in Shanghai.
    "The risk of losing money is bigger than earning a profit,"
he said, adding his company still has around 200,000 tonnes of
unsold stocks at ports.
    Shanghai rebar futures closed little changed at
3,547 yuan ($560) a tonne on Tuesday, after rising more than 1
percent during the session to 3,587 yuan. Spot Tangshan billet
prices rose by 60 yuan per tonne on Monday.
    "The demand on the ground for steel hasn't really changed,
it's still weak. Some traders chase prices higher only to find
out that actual physical demand is not as good as they thought,"
said the Shanghai trader.
    
  Shanghai rebar futures and iron ore indexes at 0705 GMT
                                                                                       
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3547     +4.00        +0.11
  PLATTS 62 PCT INDEX             104.25     -2.00        -1.88
  THE STEEL INDEX 62 PCT INDEX     103.7     -2.70        -2.54
  METAL BULLETIN INDEX             106.2     -2.06        -1.90
                                                                                       
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.3093 Chinese yuan)

 (Editing by Chris Gallagher)
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