Fri Jan 4, 2013
By Fayen Wong
Jan 4 (Reuters) - Iron ore climbed to its highest in more than a year at around $150 a tonne, with Chinese mills continuing to replenish inventories as recent economic data fuelled hopes of better demand in the new year.
Slower domestic production during the winter and restocking by steel mills and traders ahead of the looming cyclone season in Australia have also bolstered prices, traders said.
The benchmark index for 62-percent grade iron ore .IO62-CNI=SI jumped 3.4 percent to $149.80 a tonne on Thursday, a level last seen in October 2011, according to the Steel Index.
"Some traders are still restocking and I think the latest batch of strong China PMI (Purchasing Managers' Index) data has boosted their confidence on demand," said a Shanghai-based trader.
Growth in China's increasingly important services sector accelerated in December at its fastest pace in four months, adding to signs of a modest year-end revival in the world's second-largest economy.
Two PMIs on the manufacturing sector earlier this week also suggested China's economic growth was picking up, although signs persist it depends primarily on state-led investment.
Traders said a cargo of Australian Newman fines was traded at $157.18 a tonne on Friday, along with number of deals for 58 percent-grade ore transacted at $143-$144 a tonne.
Still, there are growing concerns that the recent spike in iron ore prices will not last, with the world's No. 2 producer, Rio Tinto , adding to the chorus of warnings.
Rio Tinto iron ore chief executive Sam Walsh said the current rally in prices was temporary and due to nervousness from Chinese steel mills on Australian supplies during the cyclone season which runs from November to April, the Australian newspaper reported on Thursday.
Domestic iron ore output in China also tends to fall sharply in the first quarter because of winter, which has contributed to steel mills' aggressive restocking in recent weeks, traders said.
Analysts said iron ore price gains, rebounding some 70 percent since their three-year trough of $87 in early September, have far outweighed the rise in steel prices. Shanghai rebar has only climbed about 25 percent from the September lows.
"As a result, the brief return to profitability for the Chinese steel industry in October, after sustained losses in the preceding 5-6 months is likely to have been reversed again, particularly in December," Wiktor Biekski, an analyst from VTB Capital, said in a research note.
"We therefore think steel mill restocking is likely to ease back in the short-term in the hope that spot iron ore falls back."
The most active rebar futures contract on the Shanghai Futures Exchange closed up 0.8 percent at 3,990 yuan ($641) a tonne on Friday, after easing from a five-month high of 4,023 yuan. ($1 = 6.2303 Chinese yuan)
(Editing by Ron Popeski)
By Fayen Wong
Jan 4 (Reuters) - Iron ore climbed to its highest in more than a year at around $150 a tonne, with Chinese mills continuing to replenish inventories as recent economic data fuelled hopes of better demand in the new year.
Slower domestic production during the winter and restocking by steel mills and traders ahead of the looming cyclone season in Australia have also bolstered prices, traders said.
The benchmark index for 62-percent grade iron ore .IO62-CNI=SI jumped 3.4 percent to $149.80 a tonne on Thursday, a level last seen in October 2011, according to the Steel Index.
"Some traders are still restocking and I think the latest batch of strong China PMI (Purchasing Managers' Index) data has boosted their confidence on demand," said a Shanghai-based trader.
Growth in China's increasingly important services sector accelerated in December at its fastest pace in four months, adding to signs of a modest year-end revival in the world's second-largest economy.
Two PMIs on the manufacturing sector earlier this week also suggested China's economic growth was picking up, although signs persist it depends primarily on state-led investment.
Traders said a cargo of Australian Newman fines was traded at $157.18 a tonne on Friday, along with number of deals for 58 percent-grade ore transacted at $143-$144 a tonne.
Still, there are growing concerns that the recent spike in iron ore prices will not last, with the world's No. 2 producer, Rio Tinto , adding to the chorus of warnings.
Rio Tinto iron ore chief executive Sam Walsh said the current rally in prices was temporary and due to nervousness from Chinese steel mills on Australian supplies during the cyclone season which runs from November to April, the Australian newspaper reported on Thursday.
Domestic iron ore output in China also tends to fall sharply in the first quarter because of winter, which has contributed to steel mills' aggressive restocking in recent weeks, traders said.
Analysts said iron ore price gains, rebounding some 70 percent since their three-year trough of $87 in early September, have far outweighed the rise in steel prices. Shanghai rebar has only climbed about 25 percent from the September lows.
"As a result, the brief return to profitability for the Chinese steel industry in October, after sustained losses in the preceding 5-6 months is likely to have been reversed again, particularly in December," Wiktor Biekski, an analyst from VTB Capital, said in a research note.
"We therefore think steel mill restocking is likely to ease back in the short-term in the hope that spot iron ore falls back."
The most active rebar futures contract on the Shanghai Futures Exchange closed up 0.8 percent at 3,990 yuan ($641) a tonne on Friday, after easing from a five-month high of 4,023 yuan. ($1 = 6.2303 Chinese yuan)
(Editing by Ron Popeski)
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