Iron ore seen weak on lean Chinese demand
Source: www.chinamining.org Citation: Reuters Date:Jan.21, 2013
Spot iron ore prices may be headed for more weakness this week amid lean demand from top buyer China, although expectations of tight supplies during the first quarter should keep losses in check.
Iron ore prices fell for the first time in seven weeks last week after a surge that pushed them to 15-month highs prompted Chinese mills to step back after aggressively replenishing stocks since December.
"Mills are not in the mood to buy anything at the moment.
They are probably waiting for prices to fall further before they go back to the market," said a physical iron ore trader in Shanghai.
A 165,000-tonne cargo of 61-percent grade Australian Pilbara iron ore fines was sold on Monday on the trading platform run by China Beijing International Mining Exchange at $146 a tonne, up about a dollar from a previous tender for the same grade, the trader said.
It was not clear if a Chinese steel mill bought the cargo, but the modest price increase may not necessarily be repeated in other physical deals, traders said.
"We see strong support for prices at $140. Some traders are also not willing to sell if prices drop so much, especially if the cargo is not for immediate delivery. They have time to wait for a better bid," said another trader in Shanghai.
Miner BHP Billiton is selling 50,000 tonnes of 58.5-percent grade iron ore fines at a tender closing on Tuesday, traders said.
Iron ore with 62 percent iron content , the industry benchmark, slipped 0.2 percent to $145.10 a tonne on Friday, the lowest since Jan. 2, according to data provider Steel Index.
The price fell 6.3 percent last week, but remains 67 percent higher than the three-year lows touched in September.
Weaker steel prices in China, the world`s No. 1 consumer and producer, also curbed appetite for iron ore.
The price of steel billet in China`s key Tangshan area fell by 50-70 yuan ($8-$11) a tonne last week amid slower sales, traders said.
On Monday, the most-traded rebar contract for May delivery on the Shanghai Futures Exchange fell nearly 1 percent to close at 3,965 yuan a tonne, pulling further away from a six-month peak of 4,047 yuan hit on Jan. 7.
But tight iron ore supplies, partly due to weather risks in top exporter Australia and a likely spike in China`s crude steel output to tap into a strong construction season in March should support iron ore prices, said bulk-commodity sales executive Melinda Moore at Standard Bank.
"While a number of mills are trying to downplay their recent restocking panic, suggesting they have 30-40 days supply on hand, we would argue that with March output rates likely to be up by 6-10 percent versus January, they are far from overstocked.
"Given the additional threat of future weather woes, particularly the eye of the Australian cyclone season hitting in February, most mills need to be carrying additional stocks for protection. This is certainly not the time of the year to initiate a destock," Moore said in a note.
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