Thu Aug 23, 2012
* Iron ore at lowest since December 2009
* China factory activity hits 9-month low
* Rio Tinto sees iron ore prices testing support levels
* Fortescue sees pickup in Chinese ore demand later this year
By Manolo Serapio Jr
SINGAPORE, Aug 23 (Reuters) - Shanghai steel futures fell for a ninth straight day to an all-time low on Thursday after fresh manufacturing data showed China's economy may not rebound without the aid of stimulus measures, suggesting steel demand will stay weak.
Spot iron ore prices hit their lowest since December 2009 and moved closer to $100 a tonne, as Chinese steel mills shunned contracted shipments on expectations that prices of the raw material could fall some more.
China's factory activity shrank the most in nine months in August, according to a survey by HSBC, underlining the need for Beijing to take more policy action to stop a slowdown in economic growth now in its seventh quarter.
"The fourth quarter could be very, very bad as well. It's the peak period for supply of iron ore from Brazil and if China doesn't do anything to stimulate demand, the steel market will not recover," said a physical iron ore trader in Singapore.
Brazil is the world's biggest iron ore exporter after Australia, with both shipping the bulk of their output to top consumer China.
The most-traded rebar for January delivery on the Shanghai Futures Exchange hit a low of 3,519 yuan ($550) per tonne, its weakest since the bourse launched rebar futures in 2009. It closed down 0.4 percent at 3,542 yuan.
The price of rebar, used in construction, has fallen more than 18 percent from this year's peak reached in April, as China's slowing economy curbs demand for steel.
The price of iron ore, the key raw material to make steel, has dropped by a much steeper 30 percent since hitting this year's top of close to $150.
Iron ore with 62 percent iron content .IO62-CNI=SI stood at $104.70 a tonne on Wednesday, its lowest since Dec. 16, 2009.
Iron ore prices have fallen in 28 of the past 31 trading sessions amid limited buying interest from Chinese steel producers, most of whom have cut inventory levels of the raw material.
"Data on stock levels at 50 smaller steel mills shows that there has been substantial destocking over the last four weeks, with inventory dropping from 29 days of use to 21 and volumes of inventory falling 5 million tonnes," investment bank Macquarie said in a note on Aug. 20.
"In our view, this destock has been the key driver behind recent price weakness."
Sellers of imported iron ore slashed prices further on Thursday, by up to $4 per tonne, according to Beijing-based consultancy Umetal, as buyers remain few.
Iron ore prices may test support levels for a good part of the current quarter, said Tom Albanese, chief executive of Rio Tinto , the world's No. 2 iron ore miner.
"We are definitely seeing a soft demand period in China," Albanese told an industry event in Perth.
But fellow Australian iron ore miner Fortescue Metals Group was confident Chinese demand would pick up later this year, and sees iron ore prices returning to the $120 to $150 range in the short- to medium-term.
Shanghai rebar futures and iron ore indexes at 0714 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3542 -15.00 -0.42
PLATTS 62 PCT INDEX 105.75 -3.00 -2.76
THE STEEL INDEX 62 PCT INDEX 104.7 -1.70 -1.60
METAL BULLETIN INDEX 104.1 -4.70 -4.32
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3518 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Richard Pullin and Joseph Radford)
* Iron ore at lowest since December 2009
* China factory activity hits 9-month low
* Rio Tinto sees iron ore prices testing support levels
* Fortescue sees pickup in Chinese ore demand later this year
By Manolo Serapio Jr
SINGAPORE, Aug 23 (Reuters) - Shanghai steel futures fell for a ninth straight day to an all-time low on Thursday after fresh manufacturing data showed China's economy may not rebound without the aid of stimulus measures, suggesting steel demand will stay weak.
Spot iron ore prices hit their lowest since December 2009 and moved closer to $100 a tonne, as Chinese steel mills shunned contracted shipments on expectations that prices of the raw material could fall some more.
China's factory activity shrank the most in nine months in August, according to a survey by HSBC, underlining the need for Beijing to take more policy action to stop a slowdown in economic growth now in its seventh quarter.
"The fourth quarter could be very, very bad as well. It's the peak period for supply of iron ore from Brazil and if China doesn't do anything to stimulate demand, the steel market will not recover," said a physical iron ore trader in Singapore.
Brazil is the world's biggest iron ore exporter after Australia, with both shipping the bulk of their output to top consumer China.
The most-traded rebar for January delivery on the Shanghai Futures Exchange hit a low of 3,519 yuan ($550) per tonne, its weakest since the bourse launched rebar futures in 2009. It closed down 0.4 percent at 3,542 yuan.
The price of rebar, used in construction, has fallen more than 18 percent from this year's peak reached in April, as China's slowing economy curbs demand for steel.
The price of iron ore, the key raw material to make steel, has dropped by a much steeper 30 percent since hitting this year's top of close to $150.
Iron ore with 62 percent iron content .IO62-CNI=SI stood at $104.70 a tonne on Wednesday, its lowest since Dec. 16, 2009.
Iron ore prices have fallen in 28 of the past 31 trading sessions amid limited buying interest from Chinese steel producers, most of whom have cut inventory levels of the raw material.
"Data on stock levels at 50 smaller steel mills shows that there has been substantial destocking over the last four weeks, with inventory dropping from 29 days of use to 21 and volumes of inventory falling 5 million tonnes," investment bank Macquarie said in a note on Aug. 20.
"In our view, this destock has been the key driver behind recent price weakness."
Sellers of imported iron ore slashed prices further on Thursday, by up to $4 per tonne, according to Beijing-based consultancy Umetal, as buyers remain few.
Iron ore prices may test support levels for a good part of the current quarter, said Tom Albanese, chief executive of Rio Tinto , the world's No. 2 iron ore miner.
"We are definitely seeing a soft demand period in China," Albanese told an industry event in Perth.
But fellow Australian iron ore miner Fortescue Metals Group was confident Chinese demand would pick up later this year, and sees iron ore prices returning to the $120 to $150 range in the short- to medium-term.
Shanghai rebar futures and iron ore indexes at 0714 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3542 -15.00 -0.42
PLATTS 62 PCT INDEX 105.75 -3.00 -2.76
THE STEEL INDEX 62 PCT INDEX 104.7 -1.70 -1.60
METAL BULLETIN INDEX 104.1 -4.70 -4.32
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.3518 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Richard Pullin and Joseph Radford)
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