Iron Ore-Spot edges up in tentative market
Friday, 24 February 2012 | 00:00
Spot iron ore ticked higher and offer prices stayed firm on Thursday after a recent drop drew some buyers back into the market although poor steel demand in top consumer China could make any gains fleeting.
While prices of steel in China's spot market have come off recent lows, sustained domestic production continued to outpace demand.
Inventories of reinforcing steel bar, or rebar, which is used in construction, stood at 8.495 million tonnes as of Feb. 17, up 5 percent from the previous week, according to data compiled by industry consultancy Mysteel.
"Spot steel prices have been rising recently amid improving demand and strong expectation of China's monetary policy to ease further," said Wang Jin, an analyst with Everbright Futures in Shanghai.
"However, the high steel inventories will continue to weigh on steel prices. Steel mills have faced mounting pressure from a slower recovery in steel demand and still high raw material cost."
The most-traded May rebar contract on the Shanghai Futures Exchange dropped 0.3 percent to close at 4,237 yuan ($670) a tonne, falling for the first time in four sessions.
Slow steel demand in China has curbed the appetite for iron ore and sent the raw material's prices down 2 percent so far this year after falling nearly 19 percent in 2011.
But a fall in iron ore prices to two-month lows last week revived some buying interest.
"Some people believe it's good timing to stock on material, and we've seen rising purchases from both steel mills and traders," said an iron ore trader in Qingdao in China's eastern Shandong province.
Iron ore with 62 percent iron content .IO62-CNI=SI rose 0.4 percent to $135.90 a tonne on Wednesday, said reference price provider the Steel Index.
It marked a third day of gains for iron ore, rising 1.2 percent over the period, and looked set to extend modest gains with offer prices of imported ore in China on Thursday staying firm.
Australia's Pilbara iron ore fines were quoted at $136-$138 a tonne, cost and freight, and Newman fines were at $139-$141, while lower-grade Yandi fines were at $125-$128, said Chinese consultancy Umetal.
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