September 24, 2012 / 7:21 AM / 5 years ago

UPDATE 1-Iron ore prices under pressure, China restocking seen limited

* Iron ore fell for third day to $106.40/T on Friday
    * Sellers cut iron ore price offers as market turns weak

 (Updates rebar price)
    By Manolo Serapio Jr
    SINGAPORE, Sept 24 (Reuters) - Spot iron ore prices in top
consumer China fell on Monday, reflecting limited interest among
steel mills in restocking the raw material ahead of next week's
public holiday given the uncertain outlook for steel demand.
    Price offers for imported iron ore cargoes in China dropped
between $2-$4 a tonne, traders said, after the benchmark rate
slid by more than 2 percent on Friday in line with weaker
Chinese steel prices.
    Iron ore with 62 percent iron content .IO62-CNI=SI, the
industry benchmark, dropped 2.5 percent to $106.40 a tonne on
Friday, declining for a third session running, based on data
from price provider Steel Index.
    "The market has become soft again and traders have also
slowed down amid lots of uncertainty about the outlook," said a
Shanghai-based iron ore trader.
    Iron ore has rebounded from a near three-year low of $86.70
reached earlier this month, on hopes that China's approval of
more than $150 billion worth of infrastructure projects would
boost steel demand.
    But the recovery has been unconvincing so far, with prices
facing resistance past $100, amid signs end-user demand for
steel remains weak despite a recent spike in steel prices.
    The Chinese usually restock raw materials ahead of long
public holidays, including next week's National Day break. But
many mills may have replenished enough at this point.
    "Most of the restocking activity's already occurred, so
you'd probably see Chinese physical traders dipping out of the
market," said Mark Pervan, global head of commodity research at
    Stockpiles of iron ore among small Chinese steel mills
showed a stabilisation of levels over the past fortnight,
investment bank Macquarie said, citing data from industry
consultancy Mysteel.
    The inventory now sits at 17.3 days worth of consumption,
rising slightly from 17 days as of Sept. 7, Macquarie said,
although still much smaller than the 27-30 days over the past
    Weaker steel demand and wild swings in iron ore prices had
prompted Chinese producers to keep smaller inventories of iron
ore this year. 
    "Iron ore prices are likely to fall further before the
holiday and I don't expect any turnaround in the near future,"
said a trader in China's eastern Shandong province.
    Shanghai rebar futures rebounded nearly 2 percent
to close at 3,543 yuan ($560) per tonne on Monday after falling
to one-week lows in the previous session, although traders said
the gains are unlikely to be sustained unless end-user demand
recovers strongly.
  Shanghai rebar futures and iron ore indexes at 0701 GMT
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3543    +66.00        +1.90
  PLATTS 62 PCT INDEX             106.25     -3.50        -3.19
  THE STEEL INDEX 62 PCT INDEX     106.4     -2.70        -2.47
  METAL BULLETIN INDEX            108.26     -2.70        -2.43
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
($1 = 6.3053 Chinese yuan)

 (Additional reporting by Ruby Lian in Shanghai; Editing by
Joseph Radford and Miral Fahmy)
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