UPDATE 1-Shanghai steel falls to 2-week low, iron ore pressured

Mon Oct 15, 2012 3:15am EDT

Related Topics

* China mills cautious, waiting for iron ore to drop further
    * China Sept iron ore imports at 20-month high

 (Updates rebar price)
    By Manolo Serapio Jr
    SINGAPORE, Oct 15 (Reuters) - Shanghai steel futures fell
nearly 2 percent on Monday to their lowest in two weeks,
reflecting slow end-user demand in the world's top consumer and
putting pressure on iron ore prices, whose rapid rise last week
prompted buyers to step back.
    The most-traded rebar contract for January delivery on the
Shanghai Futures Exchange closed down 1.6 percent at
3,582 yuan ($570) a tonne, after hitting a session low of 3,568
yuan.
    "End-user demand hasn't really changed much, it's still not
that great, but there's some buying interest out there, that's
why we're not seeing steel prices fall sharply," said a
Shanghai-based trader.
    Chinese steel prices have rebounded more than 10 percent
since early September on the back of trader restocking,
recovering iron ore prices and improved sentiment, but the
bounce is likely to be short-lived, Bank of America-Merrill
Lynch analysts said in a note.
    "Mills are staying very cautious on the recent price
recovery as they barely see any improvement in end-user demand.
Most mills expect the order book to stay flat month on month in
October," they said.
    Sellers of imported iron ore to China cut price offers by $1
to $2 a tonne on Monday, traders said. That should push down the
benchmark 62-percent spot rate .IO62-CNI=SI for the day, after
falling 1.1 percent to $114.50 per tonne on Friday, according to
data provider Steel Index.
    Iron ore prices climbed more than 12 percent on Monday and
Tuesday last week as the Chinese snapped up cargoes after a
week-long holiday in early October, but buying momentum quickly
lost steam after prices surged to 11-week highs.
    "The price increase was too fast, so mills turned cautious.
We're not really sure whether iron ore restocking is already
done, because some mills may still need to buy some raw material
in the short term, but are probably waiting for prices to fall
some more before they jump back again," said a second trader in
Shanghai.
    The upcoming once in a decade leadership transition in China
next month is also adding to the uncertainty in the market, with
the steel sector keenly watching whether Beijing will be
launching more economic stimulus and pro-growth policies.
    That is keeping smaller iron ore traders from taking
positions on cargoes, particularly those due to arrive in
November, concerned they might again end up holding material
that would be difficult to unload if prices fall too sharply, as
they did in recent months.
    China's iron ore imports rose to the highest level in 20
months in September, at 65.01 million tonnes, as buyers took
advantage of a decline in prices to replenish stocks, Chinese
data showed over the weekend.     
    There were few offers in the spot market on Monday, with
Brazil's Vale hoping to sell 48,000 tonnes of
63.35-percent grade iron ore via a tender and an Indian miner
selling 20,000 tonnes of 56/55-percent grade cargo, traders
said.
        
  Shanghai rebar futures and iron ore indexes at 0701 GMT
                                                                                       
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3582    -57.00        -1.57
  PLATTS 62 PCT INDEX                116     -2.50        -2.11
  THE STEEL INDEX 62 PCT INDEX     114.5     -1.30        -1.12
  METAL BULLETIN INDEX            115.38     -2.29        -1.95
                                                                                       
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
  
($1 = 6.2672 Chinese yuan)

 (Reporting by Manolo Serapio Jr. Editing by Clarence Fernandez
and Joseph Radford)
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