Monday 30 September 2013

Shanghai rebar holds near 12-week low ahead of China holiday

Mon Sep 30, 2013
* China final PMI slips to 50.2 from initial 51.2

* Macquarie lifits Q4 iron ore forecast to $138 from $125

* India to keep 30 pct tax on iron ore exports
By Manolo Serapio Jr
SINGAPORE, Sept 30 (Reuters) - Shanghai steel futures hovered near their lowest level since early July on Monday, pressured by slow demand ahead of a week-long holiday in top
consumer China that has thinned trading volumes.

The price of Shanghai rebar is set for its first decline in four months as supply outpaced growth in demand, curbing appetite for raw material iron ore which is also set to end
September weaker after a three-month upturn.

The most-traded rebar contract for January delivery on the Shanghai Futures Exchange was little changed at 3,584 yuan ($590) a tonne by the midday break. The contract touched
3,570 yuan on Friday, its lowest since July 3.

For the month, rebar has lost 4.5 percent so far after gaining in June to August.

Data released on Monday showed the final reading of HSBC's China Purchasing Managers' Index for September slipping to 50.2 from last week's preliminary 51.2 suggesting that a firm rebound
for Asia's economic powerhouse remains elusive.

China's daily crude steel output remained near this year's highs above 2.1 million tonnes in early to mid-September even as demand growth failed to keep pace, lifting stockpiles of the raw
material and weighing on prices.

Increased supply of iron ore in the spot market has also dragged down prices of the raw material, which has fallen more than 4 percent so far this month.

Benchmark 62-percent grade iron ore .IO62-CNI=SI dropped 1.4 percent to $131.90 a tonne on Friday, its cheapest since Sept. 20. Trading is likely to be limited this week with Chinese
markets shut for the Oct. 1-7 National Day holiday.

"I'm not receiving enquiries in the market today so far. I think most people are preparing for the holidays and any recent replenishment of stocks has been sufficient," said a Hong
Kong-based iron ore trader.

Iron ore swaps may also come under pressure amid broad-based weakness in industrial commodities and equities fueled by concerns over a looming shutdown of the U.S. government as lawmakers struggled to pass an emergency spending bill.

Despite this month's decline, iron ore prices have risen 13.2 percent for the third quarter ending on Monday and investment bank Macquarie sees the gains being sustained.

Macquarie raised its iron ore price forecast for the fourth quarter to $138 from $125 on optimism that a reform-focused dicussion at China's Congress in November would spur a
restocking cycle that could absorb an expected increase in seaborne supplies.

"While the near term is likely to see the spot iron ore price drifting in line with steel prices, given mills' adequate stock position, positive sentiment emanating from the Chinese
Congress brings the risk of an aggressive restock into year-end," Macquarie said in a note.

Indian supplies are also unlikely to improve any time soon with the government seen keeping a 30 percent tax on exports. India's finance minister said on Friday there was no case to
reduce the tax, a reversal of the government's earlier stance.

  Shanghai rebar futures and iron ore indexes at 0417 GMT

  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN4                   3584     -2.00        -0.06
  THE STEEL INDEX 62 PCT INDEX     131.9     -1.90        -1.42
  METAL BULLETIN INDEX            132.07     -3.29        -2.43

  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.1202 Chinese yuan)

(Reporting by Manolo Serapio Jr.; Editing by Richard Pullin)

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