Mon Dec 3, 2012
* China PMI data points to reviving economy
* But steel price rise seen brief, unlikely to lift ore
By Manolo Serapio Jr
SINGAPORE, Dec 3 (Reuters) - Shanghai steel futures jumped 1.6 percent on Monday, snapping a week-long fall, following more evidence that China's economy is on the mend, although demand for raw material iron ore is likely to stay subdued along with winter steel sales.
Manufacturing activity in China quickened for the first time in 13 months in November, according to a survey of factory managers by HSBC, adding to evidence that the world's No. 2 economy is recovering after a seven-quarter slowdown.
That backed weekend data that showed the country's official Purchasing Managers' Index at a seven-month high for the same period.
The most briskly traded rebar contract for May delivery on the Shanghai Futures Exchange closed up 56 yuan at 3,551 yuan ($570) a tonne.
Rebar, or reinforcing bar which is used in construction, slid 2.4 percent last week, its fifth consecutive week of decline.
While the manufacturing data bodes well for future demand from the world's top steel consumer, the immediate appetite for steel products is weak because colder weather in China, particularly in the northern part, is limiting construction activity.
"I think the rebar futures overreacted to the PMI data. I'm still not optimistic about the steel market in December. Temperature continues to drop in the northern part and that's not positive for demand," said a physical iron ore trader in Shanghai.
Shanghai rebar futures and spot steel prices in China's key Tangshan area last week fell to levels last seen in September, limiting Chinese mills' interest in iron ore.
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI dropped 1.1 percent to $115.60 per tonne on Friday, the lowest since Oct. 19, based on data from information provider Steel Index.
While demand for spot cargoes has weakened, it is even more so for forward shipments.
A Brazilian cargo of 65.5-percent grade pellet chips due to arrive in China mid-January was sold at $119.09 per tonne on Friday, traders said. That was not far off the $118.88 price for a much lower 61-percent grade Australian shipment scheduled to arrive in the second half of this month sold earlier last week,
traders said.
"The Brazilian pellets were really quite cheap and that shows you the market is not really optimistic about a recovery in January," said another Shanghai-based trader.
"I think steel prices will resume their downward trend later this week, and there's a chance iron ore could go to $110."
Shanghai rebar futures and iron ore indexes at 0702 GMT
Contract Last Change Pct Change
SHFE REBAR MAY3 3551 +56.00 +1.60
PLATTS 62 PCT INDEX 118 +0.00 +0.00
THE STEEL INDEX 62 PCT INDEX 115.6 -1.30 -1.11
METAL BULLETIN INDEX 116.59 -1.07 -0.91
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2267 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Richard Pullin and Himani Sarkar)
* China PMI data points to reviving economy
* But steel price rise seen brief, unlikely to lift ore
By Manolo Serapio Jr
SINGAPORE, Dec 3 (Reuters) - Shanghai steel futures jumped 1.6 percent on Monday, snapping a week-long fall, following more evidence that China's economy is on the mend, although demand for raw material iron ore is likely to stay subdued along with winter steel sales.
Manufacturing activity in China quickened for the first time in 13 months in November, according to a survey of factory managers by HSBC, adding to evidence that the world's No. 2 economy is recovering after a seven-quarter slowdown.
That backed weekend data that showed the country's official Purchasing Managers' Index at a seven-month high for the same period.
The most briskly traded rebar contract for May delivery on the Shanghai Futures Exchange closed up 56 yuan at 3,551 yuan ($570) a tonne.
Rebar, or reinforcing bar which is used in construction, slid 2.4 percent last week, its fifth consecutive week of decline.
While the manufacturing data bodes well for future demand from the world's top steel consumer, the immediate appetite for steel products is weak because colder weather in China, particularly in the northern part, is limiting construction activity.
"I think the rebar futures overreacted to the PMI data. I'm still not optimistic about the steel market in December. Temperature continues to drop in the northern part and that's not positive for demand," said a physical iron ore trader in Shanghai.
Shanghai rebar futures and spot steel prices in China's key Tangshan area last week fell to levels last seen in September, limiting Chinese mills' interest in iron ore.
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI dropped 1.1 percent to $115.60 per tonne on Friday, the lowest since Oct. 19, based on data from information provider Steel Index.
While demand for spot cargoes has weakened, it is even more so for forward shipments.
A Brazilian cargo of 65.5-percent grade pellet chips due to arrive in China mid-January was sold at $119.09 per tonne on Friday, traders said. That was not far off the $118.88 price for a much lower 61-percent grade Australian shipment scheduled to arrive in the second half of this month sold earlier last week,
traders said.
"The Brazilian pellets were really quite cheap and that shows you the market is not really optimistic about a recovery in January," said another Shanghai-based trader.
"I think steel prices will resume their downward trend later this week, and there's a chance iron ore could go to $110."
Shanghai rebar futures and iron ore indexes at 0702 GMT
Contract Last Change Pct Change
SHFE REBAR MAY3 3551 +56.00 +1.60
PLATTS 62 PCT INDEX 118 +0.00 +0.00
THE STEEL INDEX 62 PCT INDEX 115.6 -1.30 -1.11
METAL BULLETIN INDEX 116.59 -1.07 -0.91
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2267 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Richard Pullin and Himani Sarkar)
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