Fri Nov 2, 2012
* Firmer margins push China mills to pick up iron ore cargoes
* Shanghai rebar little changed on week
By Manolo Serapio Jr
SINGAPORE, Nov 2 (Reuters) - Iron ore hit three-month highs and is poised to stretch its winning streak to a fourth straight week as Chinese steel mills replenished stockpiles on hopes a modest revival in steel demand would keep prices firm and preserve margins.
Expectations that steel prices in top consumer China will at least remain at current levels or edge higher ahead of the country's once in a decade leadership change that kicks off next week are also encouraging iron ore buyers.
"Many clients are taking positions ahead of the Chinese leadership change. This is a typical period in China where everything must be stable," said a Singapore-based iron ore trader.
"I'm getting several inquiries from clients who are a bit short on their long-term contracts and are looking for spot cargoes."
Iron ore with 62 percent iron content .IO62-CNI=SI, the industry benchmark, rose nearly 1 percent to $120.30 a tonne on Thursday, its loftiest since July 25, according to data provider Steel Index. It is up 0.6 percent for the week.
At current steel prices in China, mills are enjoying modest profit margins, but they could be easily squeezed if iron ore prices rise faster, traders said, hence the limited gain in iron ore prices this week.
"Once the price hits $125, I think a lot of the steel mills will complain and step back from the market," said the Singapore trader.
The most traded rebar for May delivery on the Shanghai Futures Exchange closed nearly flat at 3,676 yuan ($590) a tonne, and also little changed for the week.
Spot cargoes sold by miners this week showed shipments being sold not far off previous prices or slightly higher, reflecting cautious optimism among buyers.
Top iron ore miner Vale sold another cargo of 65.61-percent grade material at around $130 a tonne at a tender on Thursday, traders said, lower than market expectations of $132 but in line with recent transactions.
A separate cargo of 63.8-percent grade material was sold at $123.80 per tonne, in line with expectations, traders said.
Recent data suggesting the Chinese economy is slowly regaining traction may bode well for steel and iron ore demand.
China's manufacturing activity picked up in October, according to government and private sector factory surveys on Thursday, showing the world's No. 2 economy may be on the road to recovery after a seven-quarter slowdown.
"There's room for steel demand from manufacturing to increase as we end the destocking of manufactured products," said Graeme Train, commodity analysts at Macquarie in Shanghai.
"China has been destocking white goods and machinery and autos all year so even if demand is just flattish, then you should get an increase in production of these products which should boost steel consumption."
Shanghai rebar futures and iron ore indexes at 0705 GMT
Contract Last Change Pct Change
SHFE REBAR MAY3 3676 -3.00 -0.08
PLATTS 62 PCT INDEX 122 +1.00 +0.83
THE STEEL INDEX 62 PCT INDEX 120.3 +1.00 +0.84
METAL BULLETIN INDEX 121.56 +0.95 +0.79
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2405 Chinese yuan)
(Editing by Ed Davies and Joseph Radford)
* Firmer margins push China mills to pick up iron ore cargoes
* Shanghai rebar little changed on week
By Manolo Serapio Jr
SINGAPORE, Nov 2 (Reuters) - Iron ore hit three-month highs and is poised to stretch its winning streak to a fourth straight week as Chinese steel mills replenished stockpiles on hopes a modest revival in steel demand would keep prices firm and preserve margins.
Expectations that steel prices in top consumer China will at least remain at current levels or edge higher ahead of the country's once in a decade leadership change that kicks off next week are also encouraging iron ore buyers.
"Many clients are taking positions ahead of the Chinese leadership change. This is a typical period in China where everything must be stable," said a Singapore-based iron ore trader.
"I'm getting several inquiries from clients who are a bit short on their long-term contracts and are looking for spot cargoes."
Iron ore with 62 percent iron content .IO62-CNI=SI, the industry benchmark, rose nearly 1 percent to $120.30 a tonne on Thursday, its loftiest since July 25, according to data provider Steel Index. It is up 0.6 percent for the week.
At current steel prices in China, mills are enjoying modest profit margins, but they could be easily squeezed if iron ore prices rise faster, traders said, hence the limited gain in iron ore prices this week.
"Once the price hits $125, I think a lot of the steel mills will complain and step back from the market," said the Singapore trader.
The most traded rebar for May delivery on the Shanghai Futures Exchange closed nearly flat at 3,676 yuan ($590) a tonne, and also little changed for the week.
Spot cargoes sold by miners this week showed shipments being sold not far off previous prices or slightly higher, reflecting cautious optimism among buyers.
Top iron ore miner Vale sold another cargo of 65.61-percent grade material at around $130 a tonne at a tender on Thursday, traders said, lower than market expectations of $132 but in line with recent transactions.
A separate cargo of 63.8-percent grade material was sold at $123.80 per tonne, in line with expectations, traders said.
Recent data suggesting the Chinese economy is slowly regaining traction may bode well for steel and iron ore demand.
China's manufacturing activity picked up in October, according to government and private sector factory surveys on Thursday, showing the world's No. 2 economy may be on the road to recovery after a seven-quarter slowdown.
"There's room for steel demand from manufacturing to increase as we end the destocking of manufactured products," said Graeme Train, commodity analysts at Macquarie in Shanghai.
"China has been destocking white goods and machinery and autos all year so even if demand is just flattish, then you should get an increase in production of these products which should boost steel consumption."
Shanghai rebar futures and iron ore indexes at 0705 GMT
Contract Last Change Pct Change
SHFE REBAR MAY3 3676 -3.00 -0.08
PLATTS 62 PCT INDEX 122 +1.00 +0.83
THE STEEL INDEX 62 PCT INDEX 120.3 +1.00 +0.84
METAL BULLETIN INDEX 121.56 +0.95 +0.79
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2405 Chinese yuan)
(Editing by Ed Davies and Joseph Radford)
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