Tue Nov 27, 2012
* China daily steel output steady in mid-Nov
* Iron ore swaps head lower, spot seen slipping to $110
By Manolo Serapio Jr
SINGAPORE, Nov 27 (Reuters) - Shanghai steel futures touched two-month lows on Tuesday as winter reduced demand from the construction sector in top consumer China and sent spot prices for raw material iron ore to their weakest since October.
Iron ore forward swaps also slipped, indicating market participants see physical prices easing further.
The most active rebar contract for May delivery on the Shanghai Futures Exchange fell to as low as 3,521 yuan ($570) a tonne, its weakest since Sept. 24. It closed down half a percent to 3,537 yuan.
Price offers for imported iron ore cargoes in China dropped another $1 per tonne on Tuesday, a day after the benchmark 62-percent grade .IO62-CNI=SI fell 0.6 percent to $118.20 a tonne, the lowest since Oct. 23, based on data from Steel Index.
"You have a seasonal slowdown in steel demand in China and you're not really getting a cost push from iron ore because it's also coming off," said Freight Investor Services broker Rory MacDonald, explaining the drop in Chinese steel prices.
The index-based price could move toward $110 between now and the remainder of the year, said MacDonald.
MORE DOWNSIDE
Swaps are already trading below index levels, brokers said.
The December contract was trading at $114/$114.75 versus Monday's close of $115.03 and January was at $113/$114.75 from $114.25, traders said. The contracts are cleared by the Singapore Exchange, which clears the bulk of globally traded iron ore swaps.
"There's probably more risk to the downside than to the upside so swaps could come off further and so will the index," said a trader in Singapore.
"People are expecting weaker numbers on physicals for the rest of this month and into December."
Top miner Vale sold 80,000 tonnes of 65-percent grade iron ore at $126.66 a tonne at a tender on Monday, down from $130.51 for the sale of a similar grade in mid-November, traders said.
Vale is selling another capesize cargo of 60-percent grade material on Tuesday, and Rio Tinto is offering a capesize shipment of 61.4-percent Pilbara iron ore fines, traders said.
The next kick upward for prices could be during the weeks leading up to the Lunar New Year holiday in February when Chinese mills usually stock up on iron ore ahead of, and also after, the week-long break.
That is may be why the country's steel producers are keeping output mostly steady even during the winter lull.
China's steel mills produced 1.952 million tonnes of crude steel a day on average from Nov. 11 to 20, down just 0.3 percent from the previous 10-day period, industry data showed.
"They know this is a seasonal event for them, it's nothing out of the ordinary, so they'll continue to produce ahead of renewed demand in the spring," the Singapore trader said.
Shanghai rebar futures and iron ore indexes at 0718 GMT
Contract Last Change Pct Change
SHFE REBAR MAY3 3537 -16.00 -0.45
PLATTS 62 PCT INDEX 119.5 -0.25 -0.21
THE STEEL INDEX 62 PCT INDEX 118.2 -0.70 -0.59
METAL BULLETIN INDEX 119.64 -0.27 -0.23
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2255 Chinese yuan)
(Editing by Miral Fahmy)
* China daily steel output steady in mid-Nov
* Iron ore swaps head lower, spot seen slipping to $110
By Manolo Serapio Jr
SINGAPORE, Nov 27 (Reuters) - Shanghai steel futures touched two-month lows on Tuesday as winter reduced demand from the construction sector in top consumer China and sent spot prices for raw material iron ore to their weakest since October.
Iron ore forward swaps also slipped, indicating market participants see physical prices easing further.
The most active rebar contract for May delivery on the Shanghai Futures Exchange fell to as low as 3,521 yuan ($570) a tonne, its weakest since Sept. 24. It closed down half a percent to 3,537 yuan.
Price offers for imported iron ore cargoes in China dropped another $1 per tonne on Tuesday, a day after the benchmark 62-percent grade .IO62-CNI=SI fell 0.6 percent to $118.20 a tonne, the lowest since Oct. 23, based on data from Steel Index.
"You have a seasonal slowdown in steel demand in China and you're not really getting a cost push from iron ore because it's also coming off," said Freight Investor Services broker Rory MacDonald, explaining the drop in Chinese steel prices.
The index-based price could move toward $110 between now and the remainder of the year, said MacDonald.
MORE DOWNSIDE
Swaps are already trading below index levels, brokers said.
The December contract was trading at $114/$114.75 versus Monday's close of $115.03 and January was at $113/$114.75 from $114.25, traders said. The contracts are cleared by the Singapore Exchange, which clears the bulk of globally traded iron ore swaps.
"There's probably more risk to the downside than to the upside so swaps could come off further and so will the index," said a trader in Singapore.
"People are expecting weaker numbers on physicals for the rest of this month and into December."
Top miner Vale sold 80,000 tonnes of 65-percent grade iron ore at $126.66 a tonne at a tender on Monday, down from $130.51 for the sale of a similar grade in mid-November, traders said.
Vale is selling another capesize cargo of 60-percent grade material on Tuesday, and Rio Tinto is offering a capesize shipment of 61.4-percent Pilbara iron ore fines, traders said.
The next kick upward for prices could be during the weeks leading up to the Lunar New Year holiday in February when Chinese mills usually stock up on iron ore ahead of, and also after, the week-long break.
That is may be why the country's steel producers are keeping output mostly steady even during the winter lull.
China's steel mills produced 1.952 million tonnes of crude steel a day on average from Nov. 11 to 20, down just 0.3 percent from the previous 10-day period, industry data showed.
"They know this is a seasonal event for them, it's nothing out of the ordinary, so they'll continue to produce ahead of renewed demand in the spring," the Singapore trader said.
Shanghai rebar futures and iron ore indexes at 0718 GMT
Contract Last Change Pct Change
SHFE REBAR MAY3 3537 -16.00 -0.45
PLATTS 62 PCT INDEX 119.5 -0.25 -0.21
THE STEEL INDEX 62 PCT INDEX 118.2 -0.70 -0.59
METAL BULLETIN INDEX 119.64 -0.27 -0.23
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2255 Chinese yuan)
(Editing by Miral Fahmy)
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