Iron ore, Shanghai steel near 2-month peak as demand revives

Tue Oct 9, 2012 1:22am EDT

Related Topics

* Firmer China steel prices, restocking lift iron ore
    * BHP to cut iron ore jobs as demand slowdown bites

    By Manolo Serapio Jr
    SINGAPORE, Oct 9 (Reuters) - Spot iron ore prices climbed to
their highest in almost two months on Tuesday as steel mills
from top buyer China snapped up cargoes to replenish stockpiles,
encouraged by higher steel prices which also hit their loftiest
since August.
    Miners are gradually increasing offers of iron ore cargoes
in the spot market as more and more Chinese buyers return after
last week's public holiday, although traders say some buyers
could soon recoil if prices rise too fast.
    "Overall sentiment has been a lot better with the Chinese
returning this week," said Jamie Pearce, head of iron ore
brokering at SSY Futures, part of the shipbroking group Simpson
Spence and Young.
    "We have seen Chinese mills bidding high numbers on
physicals to try and secure cargoes," said Pearce, adding that
the Chinese were also the main buyers of iron ore forward swaps
so far this week.
    Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI surged almost 6 percent to $110.40 a tonne on
Monday, the highest since Aug. 16, according to data provider
Steel Index.
    It was the biggest single-day gain since early September for
iron ore which didn't move last week during with China's
national holiday.
    The upward momentum looks likely to continue, with sellers
lifting price offers for imported cargoes to China by as much as
$6 per tonne on Tuesday, traders said.    
    More cargoes are also on offer after prices spiked at
Monday's sale tenders by miners Vale and BHP Billiton
 , traders said. 
    Brazil's Vale, the world's top iron ore exporter, sold a
65-percent grade cargo at $125 a tonne, including freight, up
from a previous deal of about $116, said a trader in Shanghai.
Third-ranked BHP Billiton sold 57.7-percent grade Yandi iron ore
fines at $106.65 per tonne, he said, versus $99.50 before the
Chinese holiday.
    BHP Billiton is selling another 190,000-tonne of Yandi fines
on Tuesday, while Vale is offering 150,000 tonnes of
63.2-percent grade material and Rio Tinto  is
selling 165,000 tonnes of 61-percent grade Pilbara iron ore
fines, traders said.
    
    BHP CUTS JOBS
    Pearce said there is a chance iron ore prices can sustain
the upward momentum given the relatively modest amount of
material on offer against Chinese demand.
    "There has been lack of physical cargoes on offer recently,
so you will see mills paying a premium to secure physical
cargoes which will give it upwards momentum. But I think we will
see some resistance though when we get around the $120 levels,"
he said.
    Firmer steel prices in China which suggest buyers are either
seeing a pickup in demand or hoping for one, could support
further gains in iron ore.
    The most active rebar contract for January delivery on the
Shanghai Futures Exchange hit a session high of 3,686
yuan ($590) a tonne on Tuesday, a level unseen since Aug. 15.
    Some traders with iron ore cargoes in hand are withholding
offers, Steel Index said, suggesting some are waiting for prices
to rise further to boost returns that in recent months have been
wiped out at some trading firms as prices slid to three-year
lows after Chinese demand cooled.
    Battling weaker demand and higher costs, BHP Billiton said 
it plans to shed an undisclosed number of jobs in iron ore, its
most profitable business. 
    BHP employs just under 6,000 people in its iron ore unit,
out of more than 46,000 in the company worldwide excluding
contractors. Rivals Rio Tinto and Xstrata have both announced
job cuts at their Australian operations over the past month.
      
  Shanghai rebar futures and iron ore indexes at 0501 GMT
                                                                                                 
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3671    +15.00        +0.41
  PLATTS 62 PCT INDEX              112.5     +5.50        +5.14
  THE STEEL INDEX 62 PCT INDEX     110.4     +6.20        +5.95
  METAL BULLETIN INDEX            115.42     +8.96        +8.42
                                                                                                 
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
      
($1 = 6.2872 Chinese yuan)

 (Editing by Miral Fahmy)
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