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Iron Ore-Spot price drops to 6-1/2 mth low, steel weak
May 24, 2012 / 4:41 AM / 5 years ago

Iron Ore-Spot price drops to 6-1/2 mth low, steel weak

* Iron ore index at lowest since Nov. 8
    * Appetite for steel remains weak on China slowdown
    * Rebar hovers near 6-month low

 (Updates rebar price)	
    SHANGHAI, May 24 (Reuters) - Spot iron ore prices fell to a
6-1/2 month low below $130 a tonne this week, as steel mills in
top consumer China deferred shipments and curbed fresh buying
after domestic steel prices hovered near their cheapest in half
a year.	
    Plummeting steel prices, which have shed 6 percent in May,
coupled with doubts about domestic demand, are keeping China's
army of steelmakers on edge, making them reluctant to commit to
new orders.	
    With growing uncertainty over whether iron ore prices will
continue to drop, Chinese steel mills have been picking up
material they do need from ore piled at ports rather than making
forward bookings with miners, which can take at least 20 days to
arrive from Australia.	
    Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI fell $1.2 to $129.9 a tonne on Wednesday after a
short-lived rebound in the previous session, data from the Steel
Index showed.	
    "We've received more offers from miners over the past few
days, but few transactions have been done and buyers are closely
watching the steel prices," said an iron ore trader in Shanghai.	
    "If the government fails to speed up infrastructure
construction and is thus unable to lift steel demand, iron ore
prices are likely to touch $120 in the summer season." 	
    The most-traded rebar contract for October delivery on the
Shanghai Futures Exchange edged up 0.17 percent to 4,026
yuan ($640) per tonne, but still hovered near a 6-month trough.	
    Despite China's recent pledge to reinvigorate the economy,
uncertainties about the steps Beijing will take, and the euro
zone's deepening debt crisis, have dented investor appetite for
steel.	
    Adding to worries about a steeper-than-expected slowdown,
data showed China's factories took a hit in May as export orders
fell sharply, suggesting a surprise weakness in April's hard
economic data persists even as policymakers seek to shore up
growth. 	
    Still, some traders reckoned iron ore prices were nearing a
floor.	
    "Participants feel the market will fall by another $3-$5 and
then the 62 index should bottom out at $125 a tonne ... the
healthy price of iron ore is around $120-$130 a tonne," a Hong
Kong-based iron ore trader said. 	
    If prices were to hit $120 a tonne, it could lead to the
closure of some high-cost Chinese miners, analysts have said.	
  Shanghai rebar futures and iron ore indexes at 0330 GMT
                                                                                     
  Contract                          Last    Change  Pct Change                       
  SHANGHAI REBAR*                   4026      7.00        0.17
  PLATTS 62 PCT INDEX              132.5     -1.50       -1.10
  THE STEEL INDEX 62 PCT INDEX     129.9     -1.20       -0.92
  METAL BULLETIN INDEX            131.32     -0.74       -0.56
                                                                                     
  *In yuan/tonne                                                                     
  #Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.3345 Chinese yuan)	
	
 (Reporting by Ruby Lian and Fayen Wong; Editing by Joseph
Radford and Daniel Magnowski)

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