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Shanghai steel slips on demand doubts, iron ore at 11-week top
October 11, 2012 / 4:31 AM / 5 years ago

Shanghai steel slips on demand doubts, iron ore at 11-week top

* Worldsteel cuts 2012, 2013 global consumption forecasts
    * Baosteel keeps prices steady for 2nd straight month
    * Iron ore rally may soon stall after rapid price rise

    By Manolo Serapio Jr
    SINGAPORE, Oct 11 (Reuters) - Shanghai steel futures fell 1
percent on Thursday after a three-day climb as the outlook for
Chinese demand remained hazy despite recent gains in prices,
while iron ore hit its highest since July as mills continued to
replenish stockpiles.
    Iron ore prices have surged 13 percent between Monday and
Wednesday after the Chinese snapped up spot cargoes to boost
run-down inventories following a week-long break. 
    But a speedy rise in prices is prompting caution among some
steel producers whose margins are only starting to improve with
the recovery in steel prices from last month's low, which was
the weakest since Shanghai rebar futures were launched in 2009.
    The World Steel Association has cut its global steel
consumption forecast by nearly 1 percent in 2012 and by 2
percent next year compared to previous estimates.
 
    Steel consumption in China, the world's largest producer and
consumer, will grow 2.5 percent and 3.1 percent in 2012 and
2013, to 639.5 million tonnes and 659.2 million tonnes,
respectively, the association said.        
    The most traded rebar contract for January delivery on the
Shanghai Futures Exchange fell nearly 2 percent to a
session low of 3,611 yuan ($570) per tonne, before cutting
losses to stand at 3,649 yuan by the midday break, down 0.9
percent.
    China's steel prices, both futures and spot, are stabilising
after recent gains "and buyers are assessing whether end-user
demand will pick up significantly", said a Shanghai-based
trader. 
    "Demand growth in China is still slow and the medium- to
long-term outlook remains uncertain," he said.
    
    BAOSTEEL SURPRISE
    China's largest listed steelmaker, Baoshan Iron and Steel
, said on Wednesday it will keep prices of its main
products unchanged for a second straight month in November,
surprising many in the market who had expected a hike after a
recent run-up in spot prices. 
    Baosteel's pricing decisions usually set the benchmark for
China's steel sector, although other steelmakers appear to be
more bullish, with rival Wuhan Iron and Steel 
raising prices.
    "While some may attribute the sideways move to caution from
Baosteel about the outlook, we think the move is likely a
reflection of the fact that Baosteel's list prices are already
significantly higher than both peer and spot market prices,"
Steel Market Intelligence (SMI) said in a note.
    With Baosteel's prices around 1.1-13.5 percent higher than
Wuhan's after its latest adjustment, SMI said it expects other
steelmakers to follow Wuhan's move.    
    Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI rose 0.4 percent to $117.70 a tonne on Wednesday,
its highest since July 25, according to data provider Steel
Index.
    The price gain was much slower than the increase of around 6
percent each for Monday and Tuesday, suggesting buyers are
turning cautious.
    "Demand is still quite healthy. We have seen more inquiries
from clients who maybe not willing to take higher prices, but
they will be there to repeat the last deals," said a shipping
manager for an iron ore trading firm in Shanghai.
    "Buyers are very cautious if prices go beyond $120. We'll
probably see prices between $110 and $120 for this week and
next," he said, adding his company has sold about 30,000-40,000
tonnes of port stockpiles so far this week and are keen on
buying some cargoes.
            
  Shanghai rebar futures and iron ore indexes at 0408 GMT
                                                                                                
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3649    -33.00        -0.90
  PLATTS 62 PCT INDEX             118.75     -1.50        -1.25
  THE STEEL INDEX 62 PCT INDEX     117.7     +0.50        +0.43
  METAL BULLETIN INDEX            119.09     -0.23        -0.19
                                                                                                
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.2833 Chinese yuan)

 (Editing by Himani Sarkar)

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