Iron Ore-Spot extends gains as traders bet on China demand
Saturday, 25 February 2012 | 00:00
Spot prices of imported iron ore in China rose on Friday as traders bid up the market, betting on a recovery in domestic steel demand when construction projects resume next month.
Global miner BHP Billiton sold several cargoes this week at prices around $3 more than previous deals, traders said, adding the bulk of the buyers could be traders positioning ahead of an expected rebound in China's steel prices.
Australian Pilbara iron ore fines with 61.5 percent iron content was quoted at $138-$140 a tonne, cost and freight, up $2 from Thursday, according to Chinese consultancy Umetal.
Offers for other cargoes rose $1 a tonne, with Australian 63-grade Newman fines at $140 to $142 and Yandi fines at $126 to$129. Indian 63.5/63-grade iron ore fines were also quoted a dollar higher at $145 to $147 per tonne.
BHP Billiton sold via tender two or three capesize cargoes of high-grade Newman iron ore fines on Thursday at $141.35 to$141.75 a tonne and MAC fines at $137.25 to $138.75 per tonne, said a physical dealer in Shanghai.
"Some traders are trying to push up the price because they think steel demand would pick up in March when the weather turns better and construction activity resumes in China," he said.
BHP rivals Rio Tinto and Vale were also offering more cargoes on Friday.
Iron ore with 62 percent iron content .IO62-CNI=SI rose 2.1 percent to $138.70 a tonne on Thursday, said reference price provider the Steel Index, its biggest percentage gain since Dec. 21. It marked a fourth straight day of gains for iron ore.
But with the upturn in spot prices mainly driven by the results of the sale tenders, some traders were uncertain whether the gains would be sustained unless domestic steel demand indeed perked up.
The most-active May rebar contract on the Shanghai Futures Exchange closed nearly flat at 4,234 yuan ($670) a tonne. Despite the drop, rebar rose nearly 2 percent for the week after a commodity-wide rally on Tuesday.
Inquiries from steel mills for readily available and usually cheaper iron ore stockpiles at Chinese ports have not picked up yet, said another Shanghai-based trader.
"Some of the mills are not ready to buy at current prices,they still want some discount for port stocks," he said.
Stockpiles of imported iron ore have dropped for the past three weeks, but only slightly to 98.94 million tonnes this week from a record 101 million tonnes in early February.
While prices of steel in China's spot market have come off recent lows, sustained domestic production continued to outpace demand.
"Many steel mills are producing to the point of incurring losses so they are keen to raise prices, but the slow growth in steel demand will be the major setback for the steel market this year," said an iron ore trader in China's coastal Shandong province.
"In the short term, steel mills are still facing heavy pressure from high inventories, so that the market doesn't have the support for a sustainable rise."
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.
In line with the slow market in China, top steelmaker ArcelorMittal said it was unlikely to restart capacity at its European plants this year due to the weak steeel demand outlook in the debt crisis-hit euro zone.