Thu Jun 28, 2012
* Weak China steel market keeping buyers' hands off iron ore
* Iron ore peak capped at $160/T in H2, says poll
By Manolo Serapio Jr
SINGAPORE, June 28 (Reuters) - Bids for spot iron ore cargoes remained weak and few on Thursday as sluggish steel prices in top market China gave mills less reason to stock up on the raw material.
Iron ore prices are down more than 8 percent in the current quarter amid slower demand from China, where steel demand has been hit by a slowdown in economic activity, with some buyers anticipating further price weakness.
A Reuters poll showed iron ore prices would only stage a mild rebound in the second half of the year as China's efforts to revive growth and steel demand would be checked by increased supply, including from top exporter Australia.
Miner BHP Billiton Ltd was offering 80,000 tonnes of 62-percent grade iron ore at $137 per tonne on the GlobalOre trading platform, with the best bid at a low $129.50, a Singapore-based trader said.
That suggested buyers were expecting a further decline in prices, the trader said.
Price offers for imported cargoes in China were steady on Thursday, according to industry consultancy Umetal.
"There are some cargoes on offer, but I don't think buyers are willing to take them at current levels," said a Shanghai-based trader.
Benchmark iron ore with 62-percent iron content .IO62-CNI=SI was unchanged at $135.40 per tonne on Wednesday, according to Steel Index, following two straight days of falls.
The price rose for 10 consecutive days up to last Thursday, in its longest winning streak since mid-November, as traders bet that high steel output in China would push mills back into the spot market to restock.
Prices of steel and iron ore in China usually move in tandem, but the recent rally in iron ore was not backed by steel prices, which have been largely unchanged.
If that trend persists, iron ore prices could go back up again soon as falling rates draw back buyers. But any gains will be curtailed unless steel prices rebound significantly.
"Assuming steel prices remain the same, we should expect iron ore prices to fall by another $1 to $2 and then we'll see some stability before it goes back up," said a trader in Hong Kong. "But it will be a very narrow trading band for iron ore over the next one month, maybe between $5 and $7, unless we see some sharp lift in steel prices."
The most active rebar contract for October delivery on the Shanghai Futures Exchange rose half a percent to close at 4,085 yuan ($640) a tonne on Thursday after a four-day slide, but is still down nearly 6 percent for the quarter.
Shanghai rebar futures and iron ore indexes at 0716 GMT
Contract Last Change Pct Change
SHFE REBAR OCT2 4085 +22.00 +0.54
PLATTS 62 PCT INDEX 136.75 -0.75 -0.55
THE STEEL INDEX 62 PCT INDEX 135.4 +0.00 +0.00
METAL BULLETIN INDEX 136.73 -0.89 -0.65
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1=6.3554 Chinese yuan)
(Editing by Clarence Fernandez)
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