February 6, 2012 / 4:00 AM / 8 years ago

Iron Ore-Spot seen ticking higher, China steel eyed

* Offer prices for Australian, Indian ore up $1-$2/tonne
    * Slow China steel market keeping iron ore rise in check
    * Iron ore stockpiles at Chinese ports top 100 mln T

 (Adds Australian tender, offer prices, updates rebar price)	
    By Manolo Serapio Jr	
    SINGAPORE, Feb 6 (Reuters) - Iron ore may extend
modest gains this week as more Chinese steel producers return to
the spot market to stock up, but a sluggish domestic steel
market is likely to cap any gains in price.	
    Chinese steel prices have been largely steady so far this
year with activity in the domestic construction sector, a heavy
steel user, yet to fully resume.	
    "Construction activity is still low because it's still
winter in the northern part of China and we only expect steel
demand to return later this month or in March," said a
Shanghai-based iron ore trader.	
    Mirae Asset Securities said it was keeping its "underweight"
stance on China's steel sector this year, particularly the large
state-owned steel mills.	
    "The structural driver of steel demand - urbanization -
remains a valid long-term call, but it may halt in 2012 if the
central government continues its crackdown on house prices," the
brokerage said in a note.	
    China's slack steel demand meant a slow start for iron ore
this year, which gained a modest 3.5 percent versus a more than
12 percent rise for copper, another key construction material. 	
    The most-traded May rebar contract on the Shanghai Futures
Exchange has risen 3 percent so far this year, closing
nearly flat at 4,330 yuan ($690) a tonne on Monday. 	
    Iron ore with 62 percent iron content .IO62-CNI=SI rose
0.1 percent to $143.30 a tonne on Friday, according to the Steel
Index, its highest level since Nov. 22.	
    "Iron ore prices could rise further this week with some more
mills going back to the market and traders taking positions,"
said the Shanghai trader.	
    Offer prices for Australian ore in China rose by
at least a dollar on Monday, with 61.5-grade Pilbara iron ore
fines quoted at $142-$144 a tonne, cost and freight, and
58-grade Yandi fines at $130-$132, said industry consultancy
Umetal.	
    Indian 63.5/63-grade fines were offered at $148-$151 a
tonne, up $2 from Friday, said Umetal.    	
    Traders are eyeing another tender by global miner BHP
Billiton  due to close later on Monday,
particularly with prices moving higher at recent tenders.	
    BHP last sold Yandi fines at $130.5 a tonne, C&F on Friday,
up from $130 on Thursday, traders said.         	
    But a sizeable amount of iron ore at Chinese ports, which is
readily available and which buyers can buy in smaller tonnages
unlike fresh spot cargoes, may limit appetite for more imports,
traders said.	
    Stockpiles of imported iron ore at major Chinese ports
reached 101.49 million tonnes last week, with shipments from the
three biggest exporters -- Australia, Brazil and India --
rising, Chinese consultancy Mysteel said on Friday. 	
        	
  Shanghai rebar futures and iron ore indexes at 0701 GMT
                                                                                
  Contract                          Last    Change  Pct Change
  SHANGHAI REBAR*                   4330     -2.00       -0.05
  PLATTS 62 PCT INDEX                145      0.50        0.35
  THE STEEL INDEX 62 PCT INDEX     143.3      0.20        0.14
  METAL BULLETIN INDEX            143.06      0.24        0.17
                                                                                
  *In yuan/tonne
  #Index in dollars/tonne, show close for the previous trading day
    
($1 = 6.3028 Chinese yuan)	
	
 (Editing by Miral Fahmy)
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