October 10, 2012 / 7:41 AM / in 5 years

UPDATE 1-Iron ore at 10-week high on China restocking, stimulus hopes

* Iron ore gains over 12 pct Monday-Tuesday
    * Some Chinese buyers turning cautious after rapid rise
    * Shanghai rebar hits 2-month high

 (Updates rebar price, adds BHP tender)
    By Manolo Serapio Jr
    SINGAPORE, Oct 10 (Reuters) - Chinese steel futures rose to
two-month highs on Wednesday, driven by hopes of more stimulus
measures from Beijing to aid a slowing economy and backing
further gains in iron ore prices that have leapt by more than 12
percent in the past two days.
    Chinese steel producers, the world's biggest buyers of iron
ore, returned to the spot market this week hungry for the raw
material after last week's National Day holiday, helping push
iron ore prices to their highest in 10 weeks.
    But traders said some buyers are turning cautious given the
rapid rise in prices, also abetted by fewer available spot
cargoes, suggesting the price rally could soon hit a wall if
steel demand does not take off.
    The most briskly traded rebar contract for January delivery
on the Shanghai Futures Exchange peaked at 3,699 yuan
($590) per tonne intraday, its highest level since Aug. 13. It
closed up 0.4 percent at 3,682 yuan.
    Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI climbed 6.2 percent to $117.20 a tonne on
Tuesday, its highest since Aug. 1, according to data provider
Steel Index.   Iron ore has now gained 12.5 percent over the
past two days.
    "The price recovery is due to expectations of more policy
measures by China to boost consumption growth including steel as
well as restocking," said Helen Lau, senior commodity analyst at
UOB-Kay Hian in Hong Kong.
    Apart from cuts in interest rates and banks' reserve
requirement to boost liquidity, China approved 1 trillion yuan
worth of infrastructure projects last month to lift a slowing
    China is also likely to start a new round of incentive
policies to encourage vehicle purchases in rural areas, the
official China Securities Journal reported on Wednesday.
    Prices for spot iron ore cargoes have been rising since the
Chinese returned to the market on Monday. Miner BHP Billiton
  sold a cargo of 57.7-percent grade Australian
Yandi iron ore fines at $108.85 a tonne on Tuesday, up from
$106.65 on Monday, traders said.
    Rio Tinto  sold two cargoes of 61
percent-grade Australian Pilbara blend fines at $119.01 per
tonne, traders said, exceeding the price for the higher
62-percent grade.
    Vale is selling on Wednesday a 90,000-tonne cargo
of 63.2-percent grade iron ore after selling a shipment with the
same specifications at 121.67 per tonne on Tuesday, said a
Singapore-based trader. Rio Tinto is holding a tender for 75,000
tonnes of 64.5-percent grade material.
    BHP Billiton is offering another 100,000 tonnes of Yandi
fines and 90,000 tonnes of 61-percent grade MAC fines, the
trader said.
    "Steel mills were quite active in restocking over the past
two days, but the sentiment has been waning a little bit since
yesterday and traders are reluctant to book forward cargoes at
the current high levels," said a Shanghai-based iron ore trader.
    "We planned to buy some, but we are still cautious." 
    Lau at UOB-Kay Hian said the current iron ore rally is
mostly sentiment-driven and could stall if China's steel demand
disappoints again.
    "It has to be supported by a real recovery in steel demand
to be sustainable," she said.
  Shanghai rebar futures and iron ore indexes at 0710 GMT
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3682    +15.00        +0.41
  PLATTS 62 PCT INDEX             120.25     +7.75        +6.89
  THE STEEL INDEX 62 PCT INDEX     117.2     +6.80        +6.16
  METAL BULLETIN INDEX            119.32     +3.90        +3.38
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
($1 = 6.2878 Chinese yuan)

 (Additional reporting by Ruby Lian in SHANGHAI; Editing by
Himani Sarkar)
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