Mon Oct 15, 2012
* China mills cautious, waiting for iron ore to drop further
* China Sept iron ore imports at 20-month high
By Manolo Serapio Jr
SINGAPORE, Oct 15 (Reuters) - Shanghai steel futures fell nearly 2 percent on Monday to their lowest in two weeks, reflecting slow end-user demand in the world's top consumer and putting pressure on iron ore prices, whose rapid rise last week prompted buyers to step back.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange was down 1.5 percent at 3,584 yuan ($570) a tonne by the midday break, after hitting a session low of 3,571 yuan.
"End-user demand hasn't really changed much, it's still not that great, but there's some buying interest out there, that's why we're not seeing steel prices fall sharply," said a Shanghai-based trader.
Chinese steel prices have rebounded more than 10 percent since early September, on the back of traders' restocking, recovering iron ore prices and improved sentiment, but the bounce is likely to be short-lived, Bank of America-Merrill Lynch analysts said in a note.
"Mills stay very cautious on the recent price recovery as they barely see any improvement in end-user demand. Most mills expect the order book to stay flat month on month in October," they said.
Sellers of imported iron ore to China cut price offers by $1 to $2 a tonne on Monday, traders said. That should push down the benchmark 62-percent spot rate .IO62-CNI=SI for the day, after falling 1.1 percent to $114.50 per tonne on Friday, according to data provider Steel Index.
Iron ore prices climbed more than 12 percent on Monday and Tuesday last week as the Chinese snapped up cargoes after a week-long holiday in early October, but the buying momentum quickly lost steam after prices surged to 11-week highs.
"The price increase was too fast, so mills turned cautious. We're not really sure whether iron ore restocking is already done, because some mills may still need to buy some raw material in the short term, but are probably waiting for prices to fall some more before they jump back again," said a second trader in
Shanghai.
The upcoming once in a decade leadership transition in China next month is also adding to the uncertainty in the market, with the steel sector keen on whether Beijing will be launching more economic stimulus and pro-growth policies.
That is keeping smaller iron ore traders from taking positions on cargoes, particularly those due to arrive in November, concerned they might again end up holding material that would be difficult to unload if prices fall too sharply, as they did in recent months.
China's iron ore imports rose to the highest level in 20 months in September, to 65.01 million tonnes, as buyers took advantage of a decline in prices to replenish stocks, Chinese data showed over the weekend.
There are few offers on the spot market on Monday, with Brazil's Vale hoping to sell 48,000 tonnes of 63.35-percent grade iron ore via a tender and an Indian miner selling 20,000 tonnes of 56/55-percent grade cargo, traders said.
Shanghai rebar futures and iron ore indexes at 0457 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3584 -55.00 -1.51
PLATTS 62 PCT INDEX 116 -2.50 -2.11
THE STEEL INDEX 62 PCT INDEX 114.5 -1.30 -1.12
METAL BULLETIN INDEX 115.38 -2.29 -1.95
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2672 Chinese yuan)
(Reporting by Manolo Serapio Jr., Editing by Clarence Fernandez)
* China mills cautious, waiting for iron ore to drop further
* China Sept iron ore imports at 20-month high
By Manolo Serapio Jr
SINGAPORE, Oct 15 (Reuters) - Shanghai steel futures fell nearly 2 percent on Monday to their lowest in two weeks, reflecting slow end-user demand in the world's top consumer and putting pressure on iron ore prices, whose rapid rise last week prompted buyers to step back.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange was down 1.5 percent at 3,584 yuan ($570) a tonne by the midday break, after hitting a session low of 3,571 yuan.
"End-user demand hasn't really changed much, it's still not that great, but there's some buying interest out there, that's why we're not seeing steel prices fall sharply," said a Shanghai-based trader.
Chinese steel prices have rebounded more than 10 percent since early September, on the back of traders' restocking, recovering iron ore prices and improved sentiment, but the bounce is likely to be short-lived, Bank of America-Merrill Lynch analysts said in a note.
"Mills stay very cautious on the recent price recovery as they barely see any improvement in end-user demand. Most mills expect the order book to stay flat month on month in October," they said.
Sellers of imported iron ore to China cut price offers by $1 to $2 a tonne on Monday, traders said. That should push down the benchmark 62-percent spot rate .IO62-CNI=SI for the day, after falling 1.1 percent to $114.50 per tonne on Friday, according to data provider Steel Index.
Iron ore prices climbed more than 12 percent on Monday and Tuesday last week as the Chinese snapped up cargoes after a week-long holiday in early October, but the buying momentum quickly lost steam after prices surged to 11-week highs.
"The price increase was too fast, so mills turned cautious. We're not really sure whether iron ore restocking is already done, because some mills may still need to buy some raw material in the short term, but are probably waiting for prices to fall some more before they jump back again," said a second trader in
Shanghai.
The upcoming once in a decade leadership transition in China next month is also adding to the uncertainty in the market, with the steel sector keen on whether Beijing will be launching more economic stimulus and pro-growth policies.
That is keeping smaller iron ore traders from taking positions on cargoes, particularly those due to arrive in November, concerned they might again end up holding material that would be difficult to unload if prices fall too sharply, as they did in recent months.
China's iron ore imports rose to the highest level in 20 months in September, to 65.01 million tonnes, as buyers took advantage of a decline in prices to replenish stocks, Chinese data showed over the weekend.
There are few offers on the spot market on Monday, with Brazil's Vale hoping to sell 48,000 tonnes of 63.35-percent grade iron ore via a tender and an Indian miner selling 20,000 tonnes of 56/55-percent grade cargo, traders said.
Shanghai rebar futures and iron ore indexes at 0457 GMT
Contract Last Change Pct Change
SHFE REBAR JAN3 3584 -55.00 -1.51
PLATTS 62 PCT INDEX 116 -2.50 -2.11
THE STEEL INDEX 62 PCT INDEX 114.5 -1.30 -1.12
METAL BULLETIN INDEX 115.38 -2.29 -1.95
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2672 Chinese yuan)
(Reporting by Manolo Serapio Jr., Editing by Clarence Fernandez)
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