Tue Aug 28, 2012
* Iron ore near 3-year low, Chinese mills may restock
* ANZ says likely to cut iron ore price f'cast by avg 15 pct
* Baosteel says steel prices to remain under pressure
By Manolo Serapio Jr
SINGAPORE, Aug 28 (Reuters) - Shanghai steel futures fell nearly 2 percent to a record low on Tuesday, dropping for a 12th consecutive day, with no sign steel demand in China will recover anytime soon.
A slowing economy in China, the world's top steel market, is hurting appetite and prompting producers to curb output, cutting the need for raw material iron ore, prices of which remained at their lowest since 2009.
The most active rebar for January delivery on the Shanghai Futures Exchange closed down 1.7 percent at the session low of 3,455 yuan ($540) a tonne, the weakest since the bourse launched rebar futures in 2009.
Rebar, used in construction, has fallen nearly 8 percent so far this month, its steepest since last September. Baoshan Iron and Steel, China's biggest listed
steelmaker, expects steel prices to remain under pressure for the rest of the year as the industry shows no sign of curbing output sharply and as steps to stimulate the economy take time to kick in.
Faced with a lack of buying interest, sellers of foreign iron ore cargoes to China slashed prices a further $3-$4 a tonne on Tuesday, according to Beijing-based industry consultancy Umetal.
That followed a nearly 4 percent drop in the price of benchmark 62-percent iron ore IODBZ00-PLT to $97.50 per tonne on Monday, the lowest since November 2009, based on data from information provider Platts.
"Prices can't fall terribly far, terribly quickly from here because I think there should be enough support offered by restocking," said a Singapore-based iron ore trader.
While Chinese steel mills are cutting production, they have only done so modestly, keeping daily output near record highs around 2 million tonnes, with most producers hoping to protect their market share in a highly fragmented sector.
The country's average daily crude steel output slipped 2 percent to 1.93 million tonnes between August 11-20 compared with the first 10 days of the month, data from the China Iron and Steel Association showed on Monday.
"They have to come back to the market and restock a little bit unless we see major production cuts and we are not seeing that right now. To sustain the current rate of steel production, mills can't afford to have their iron ore inventory drop so much," said the Singapore trader.
Given the steep decline in iron ore prices since July, investment bank ANZ said it is highly likely to cut its near-term price forecasts by an average of 15 percent.
ANZ currently pegs iron ore at $128 for the third quarter and $135 in the fourth quarter, commodity strategist Natalie Rampono said.
"In our view, iron ore prices below $100/tonne look oversold, with close to 50 percent of Chinese iron ore supply losing money. But we are unlikely to see the market bounce back until mine supply starts to wind down in the coming months," the bank said in a note.
Shanghai rebar futures and iron ore indexes at 0710 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3455 -58.00 -1.65
PLATTS 62 PCT INDEX 97.5 -4.00 -3.94
METAL BULLETIN INDEX 99.53 -0.57 -0.57
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3568 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)
* Iron ore near 3-year low, Chinese mills may restock
* ANZ says likely to cut iron ore price f'cast by avg 15 pct
* Baosteel says steel prices to remain under pressure
By Manolo Serapio Jr
SINGAPORE, Aug 28 (Reuters) - Shanghai steel futures fell nearly 2 percent to a record low on Tuesday, dropping for a 12th consecutive day, with no sign steel demand in China will recover anytime soon.
A slowing economy in China, the world's top steel market, is hurting appetite and prompting producers to curb output, cutting the need for raw material iron ore, prices of which remained at their lowest since 2009.
The most active rebar for January delivery on the Shanghai Futures Exchange closed down 1.7 percent at the session low of 3,455 yuan ($540) a tonne, the weakest since the bourse launched rebar futures in 2009.
Rebar, used in construction, has fallen nearly 8 percent so far this month, its steepest since last September. Baoshan Iron and Steel, China's biggest listed
steelmaker, expects steel prices to remain under pressure for the rest of the year as the industry shows no sign of curbing output sharply and as steps to stimulate the economy take time to kick in.
Faced with a lack of buying interest, sellers of foreign iron ore cargoes to China slashed prices a further $3-$4 a tonne on Tuesday, according to Beijing-based industry consultancy Umetal.
That followed a nearly 4 percent drop in the price of benchmark 62-percent iron ore IODBZ00-PLT to $97.50 per tonne on Monday, the lowest since November 2009, based on data from information provider Platts.
"Prices can't fall terribly far, terribly quickly from here because I think there should be enough support offered by restocking," said a Singapore-based iron ore trader.
While Chinese steel mills are cutting production, they have only done so modestly, keeping daily output near record highs around 2 million tonnes, with most producers hoping to protect their market share in a highly fragmented sector.
The country's average daily crude steel output slipped 2 percent to 1.93 million tonnes between August 11-20 compared with the first 10 days of the month, data from the China Iron and Steel Association showed on Monday.
"They have to come back to the market and restock a little bit unless we see major production cuts and we are not seeing that right now. To sustain the current rate of steel production, mills can't afford to have their iron ore inventory drop so much," said the Singapore trader.
Given the steep decline in iron ore prices since July, investment bank ANZ said it is highly likely to cut its near-term price forecasts by an average of 15 percent.
ANZ currently pegs iron ore at $128 for the third quarter and $135 in the fourth quarter, commodity strategist Natalie Rampono said.
"In our view, iron ore prices below $100/tonne look oversold, with close to 50 percent of Chinese iron ore supply losing money. But we are unlikely to see the market bounce back until mine supply starts to wind down in the coming months," the bank said in a note.
Shanghai rebar futures and iron ore indexes at 0710 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3455 -58.00 -1.65
PLATTS 62 PCT INDEX 97.5 -4.00 -3.94
METAL BULLETIN INDEX 99.53 -0.57 -0.57
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3568 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)
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