Fri Oct 26, 2012
SHANGHAI, Oct 26 (Reuters) - A two-week rally in iron ore prices has begun to slow with steel mills in China cutting their purchases amid concerns about rising costs, but traders said the modest revival in the world's top steel market was likely to continue for a while.
Steel demand in China has been picking up since early September, driving up prices by more than 10 percent, largely as a result of a rise in construction activity brought as the government acts to boost infrastructure investment.
"The higher capacity utilisation rate and rising steel prices suggest that demand is picking up, though not rapidly," said Ding Rui, an analyst with Zhongcai Futures in Shanghai.
The most traded rebar contract for May delivery on the Shanghai Futures Exchange rose 0.05 percent to 3,681 yuan per tonne by the midday break on Friday, up 13 percent from its three-year low in early September.
Ding added that the steel capacity utilisation rate has exceeded 90 percent in Tangshan, a major steelmaking city in the industry's heartland of Hebei province.
China's average daily crude steel output rose to 1.916 million tonnes in the first 10 days of October compared with the preceding period, raising demand for iron ore and encouraging global miners to lift prices to a three-month high.
"Steel mills are actively looking out for prompt cargo because they are trying to fill up their steel order book for the rest of the year," said a Singapore-based iron ore trader.
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI rose 1 percent to $120 a tonne on Thursday, its highest since July 24, according to data provider Steel Index.
However, the rapid increase in iron ore prices over the past two weeks has forced steel mills to stop taking as many cargoes.
"The rally is slowing down this week because the prices went up too high. The price is increasing bit by bit this week, which is more preferable and healthy," the trader added.
He expected prices to rise to $125 before demand falters as the winter sets in from late November.
Shanghai rebar futures and iron ore indexes at 0338 GMT
Contract Last Change Pct Change
SHANGHAI REBAR* 3681 2.00 0.05
PLATTS 62 PCT INDEX 120.5 0.50 0.42
THE STEEL INDEX 62 PCT INDEX 120 1.30 1.10
METAL BULLETIN INDEX 120.48 0.64 0.53
*In yuan/tonne
#Index in dollars/tonne, show close for the previous trading day
(Reporting by Ruby Lian and David Stanway; Editing by Richard Pullin)
SHANGHAI, Oct 26 (Reuters) - A two-week rally in iron ore prices has begun to slow with steel mills in China cutting their purchases amid concerns about rising costs, but traders said the modest revival in the world's top steel market was likely to continue for a while.
Steel demand in China has been picking up since early September, driving up prices by more than 10 percent, largely as a result of a rise in construction activity brought as the government acts to boost infrastructure investment.
"The higher capacity utilisation rate and rising steel prices suggest that demand is picking up, though not rapidly," said Ding Rui, an analyst with Zhongcai Futures in Shanghai.
The most traded rebar contract for May delivery on the Shanghai Futures Exchange rose 0.05 percent to 3,681 yuan per tonne by the midday break on Friday, up 13 percent from its three-year low in early September.
Ding added that the steel capacity utilisation rate has exceeded 90 percent in Tangshan, a major steelmaking city in the industry's heartland of Hebei province.
China's average daily crude steel output rose to 1.916 million tonnes in the first 10 days of October compared with the preceding period, raising demand for iron ore and encouraging global miners to lift prices to a three-month high.
"Steel mills are actively looking out for prompt cargo because they are trying to fill up their steel order book for the rest of the year," said a Singapore-based iron ore trader.
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI rose 1 percent to $120 a tonne on Thursday, its highest since July 24, according to data provider Steel Index.
However, the rapid increase in iron ore prices over the past two weeks has forced steel mills to stop taking as many cargoes.
"The rally is slowing down this week because the prices went up too high. The price is increasing bit by bit this week, which is more preferable and healthy," the trader added.
He expected prices to rise to $125 before demand falters as the winter sets in from late November.
Shanghai rebar futures and iron ore indexes at 0338 GMT
Contract Last Change Pct Change
SHANGHAI REBAR* 3681 2.00 0.05
PLATTS 62 PCT INDEX 120.5 0.50 0.42
THE STEEL INDEX 62 PCT INDEX 120 1.30 1.10
METAL BULLETIN INDEX 120.48 0.64 0.53
*In yuan/tonne
#Index in dollars/tonne, show close for the previous trading day
(Reporting by Ruby Lian and David Stanway; Editing by Richard Pullin)
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