July 27, 2012 / 3:27 AM / 5 years ago

Iron Ore-Spot prices drift lower amid lacklustre Chinese demand

SHANGHAI, July 27 (Reuters) - Spot prices for iron ore cargoes to China
extended losses on Friday, putting the index on course for its biggest weekly
fall since October 2011, with buying interest from Chinese steelmakers still low
despite a slight recovery in rebar futures prices.
    The price of iron ore with 62 percent iron grade .IO62-CNI=SI fell for the
twelfth session in a row to $117.3 a tonne on Thursday, down 1.1 percent from
Wednesday. The index has already fallen 6.2 percent this week.
    "The majority of steel mills that I've spoken to remain pessimistic about
the steel and iron ore market outlook in the near future, and a further fall to
$110 a tonne isn't far away," said an iron ore trader in coastal Dalian city.   
    Tepid demand and a cooling economy in China, the world's biggest buyer of
the steelmaking raw material, would continue to put pressure on the revenues of
miners including Rio Tinto , BHP Billiton  and
Brazilian miner Vale, all of which have launched ambitious capacity
expansion plans on the back of surging Chinese demand.
    Vale's director of ferrous metals Jose Carlos Martins said he saw the floor
price for iron ore at $120 a tonne and predicted the global iron ore market
would rebound soon. The world's top iron ore miner posted its worst earnings
results in two years on Thursday. 
    Chinese steel futures rose for the fourth straight session after tumbling to
a record low on Monday, but investors and traders believe the recent gains would
be short-lived, with summer demand traditionally weaker and Beijing's
pro-economic growth measures unlikely to provide any immediate boost.
    The most active rebar contract on the Shanghai Futures Exchange 
edged 0.5 percent higher on Friday to 3,740 yuan ($590) per tonne, still within
touching distance of the record low of 3,652 yuan hit on Monday.
    "We can't see the recent gains as a signal for a rebound in the steel market
as the physical market remains poor with prices still falling," said a trader in
  Shanghai rebar futures and iron ore indexes at 0308 GMT
  Contract                          Last    Change  Pct Change                                    
  SHANGHAI REBAR*                   3740     20.00        0.54
  PLATTS 62 PCT INDEX                119     -0.75       -0.63
  THE STEEL INDEX 62 PCT INDEX     117.3     -1.30       -1.10
  METAL BULLETIN INDEX            118.64     -1.20       -1.00
  *In yuan/tonne                                                                                  
  #Index in dollars/tonne, show close for the previous trading day

($1 = 6.3841 Chinese yuan)

 (Reporting by Ruby Lian and David Stanway; editing by Miral Fahmy)

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