UPDATE 1-Iron ore steady, but headed for best week in a month

Fri Oct 12, 2012 3:29am EDT

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* Iron ore prices may fall further amid oversupply-CISA
    * Shanghai rebar also steady, but up 2 pct on week

 (Updates rebar price)
    By Manolo Serapio Jr
    SINGAPORE, Oct 12 (Reuters) - Spot iron ore prices in top
importer China steadied on Friday after a rally earlier this
week spurred caution among buyers Who are worried demand in the
world's top steel consumer might not rebound significantly.
    But iron ore is up 11 percent so far for the week, its best
showing in a month after prices surged earlier this week as
Chinese steel mills replenished stockpiles after a week-long
holiday.
    "I think the Chinese guys that were caught short have now
covered and that if there is much on tender today it will go at
weaker numbers and we will end the week on a softer note," said
Jamie Pearce, head of iron ore brokering at SSY Futures, part of
the shipbroking group Simpson Spence and Young.
    Price offers for imported iron ore cargoes in China,
including those from top supplier Australia, were unchanged on
Friday, traders said. 
    Benchmark 62-percent grade iron ore .IO62-CNI=SI fell 1.6
percent to $115.80 a tonne on Thursday, after hitting an 11-week
high of $117.70 on Wednesday, according to data provider Steel
Index.
    Prices for iron ore cargoes sold by miners Vale 
and BHP Billiton  have dropped over the past two
days after rising in the previous two as mills became reluctant
to chase prices higher, traders said.
    "It will be interesting to see how it develops next week
because it could be a case of whoever shows their hand first
will set the tone for the market," said Pearce.
    Despite recent gains in both futures and spot steel prices,
analysts and traders say there hasn't been a meaningful rebound
in end-user steel demand in China so far, with uncertainty
hanging over a market waiting to see whether Beijing will
unleash more economic stimulus and what's ahead for the country
after the once in a decade leadership transition next month.
    "It's very sentiment driven at the moment and we are seeing
a lot of mixed sentiment," said Pearce.
    The most active rebar contract for January delivery on the
Shanghai Futures Exchange closed little changed at
3,639 yuan ($580) a tonne. Rebar, used in construction, rose 2
percent for the week after hitting a two-month high of 3,699
yuan on Wednesday.
    Since the middle of September, prices of steel products have
only recovered slightly, with raw material cost also rising, the
China Iron and Steel Association (CISA) said on its website on
Thursday.
    "The heavy losses facing a large number of steel enterprises
are unlikely to improve in the coming period, and iron ore
prices remain in a downward trend," the industry group said.
    With China's steel production falling and iron ore in
oversupply, CISA said there remains room for iron ore prices to
decline.
    China's average daily crude steel output dropped 0.7 percent
to 1.843 million tonnes between Sept 21-30, compared to the
preceding 10 days, CISA data showed. 
    For all of September, average daily steel output fell to
1.858 million tonnes from 1.894 million tonnes in August.
            
  Shanghai rebar futures and iron ore indexes at 0703 GMT
                                                                                               
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3639     +5.00        +0.14
  PLATTS 62 PCT INDEX              118.5     -0.25        -0.21
  THE STEEL INDEX 62 PCT INDEX     115.8     -1.90        -1.61
  METAL BULLETIN INDEX            117.67     -1.42        -1.19
                                                                                               
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 
       
($1 = 6.2770 Chinese yuan)

 (Additional reporting by David Stanway in BEIJING; Editing by
Miral Fahmy)
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