July 16, 2014 / 4:47 AM / 4 years ago

China steel, iron ore hold near 7-week highs after firm GDP

* China economy grew 7.5 pct in Q2 vs 7.4 pct forecast
    * China June steel output hit record high 2.31 mln T/day
    * Rio Tinto Q2 output up, Fortescue sees more China mines

    By Manolo Serapio Jr
    SINGAPORE, July 16 (Reuters) - Steel and iron ore futures in
China steadied near seven-week highs on Wednesday after data
showed the Chinese economy grew slightly faster than expected in
the second quarter.
    Both commodities rose to their highest level since late May
on Tuesday ahead of the data on expectations that China would
continue with stimulus measures, including infrastructure
spending, to aid growth.
    The world's No. 2 economy expanded 7.5 percent in
April-June, quicker than the 7.4 percent that economists had
predicted, although they said further state support is likely
needed to meet the government's growth target this year.
    Oil, copper and other industrial commodities along with
equities were also largely steady after the data was released.
    The most-active rebar contract for January delivery on the
Shanghai Futures Exchange was unchanged at 3,144 yuan
($510) a tonne by midday. The contract peaked at 3,155 yuan on
Tuesday, its highest since May 28.
    Iron ore for September delivery on the Dalian Commodity
Exchange was nearly flat at 717 yuan a tonne, after
rising to 725 yuan in the previous session, also its loftiest
since late May.
    Firmer steel prices have helped spot iron ore prices move
closer to $100 a tonne this week, a level it breached in
mid-May, as traders raised their bets on a market recovery.
    "The question now is whether steel mills will follow suit.
But after recent restocking and port inventory still high, I
don't see that happening," said an iron ore trader in Shanghai.
    Stockpiles of imported iron ore at Chinese ports stood near
a record high at 113.4 million tonnes last week
    Mills with short-term supply needs have been "buying
regularly" from iron ore stocks sitting at the ports that are
cheaper than fresh seaborne cargoes, the Shanghai trader said.
    Benchmark 62 percent grade iron ore for immediate delivery
to China .IO62-CNI=SI gained 10 cents to $98 a tonne on
Tuesday, the highest since May 27, according to data compiled by
Steel Index.
    China's daily crude steel output rose 1.8 percent in June to
hit a record high 2.31 million tonnes, the government said.
    While follow through buying interest could lift the price to
$100, analysts at Australia and New Zealand Banking Group said
"the market remains divided on whether that level will be the
near-term ceiling."
    "Prices are unlikely to fall in the short-term as demand is
buoyed by sufficient margins for steel mills, lower feedstock
costs, and low inventory levels at mills," they said in a note.
    Iron ore prices have dropped more than a quarter this year,
shutting out higher cost producers including those in China.
Fortescue Metals Group Ltd, Australia's third-biggest
iron ore producer, said the closure of more Chinese iron ore
mines is inevitable, helping the market to rebalance.
    World no. 2 iron ore miner Rio Tinto  said
it was on track to produce 295 million tonnes of the
steel-making material in 2014, up from 266 million tonnes last
year. Rio said second-quarter output rose 11 percent to 73.1
million tonnes.    
  Shanghai rebar futures and iron ore indexes at 0408 GMT
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN5                   3144     +0.00        +0.00
  DALIAN IRON ORE DCE DCIO SEP4      717     -1.00        -0.14
  SGX IRON ORE FUTURES AUG         98.72     +0.03        +0.03
  THE STEEL INDEX 62 PCT INDEX        98     +0.10        +0.10
  METAL BULLETIN INDEX             97.89     +0.22        +0.23
  Dalian iron ore and Shanghai rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.2061 Chinese yuan)

 (Editing by Muralikumar Anantharaman)
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