Iron Ore-Spot at 6-mth Lows as Shanghai Rebar Stays Pressured-Shanghai Metals Market

Hot Keywords

  • Nickel
  • Nickel ore
  • Inventory data
  • Copper
  • Stainless steel
  • Rare earths
  • Aluminium
  • Market commentary
  • Macroeconomics
  • Zinc
  • Iron ore
  • Tin
  • Production data
  • Morning comments
  • Futures movement

Iron Ore-Spot at 6-mth Lows as Shanghai Rebar Stays Pressured

Industry News 10:05:26AM May 23, 2012 Source:SMM

* Ore extends decline to 10th day, longest since October
* Shanghai rebar falls for 5th time in seven sessions

(Updates rebar price) 

By Manolo Serapio Jr 

SINGAPORE, May 22 (Reuters) - China steel futures dropped for a fifth time in seven sessions on Tuesday as weak demand in the world's biggest consumer kept prices under pressure, curbing appetites for iron ore, which has fallen almost 10 percent so far this month. 
   
News that the Chinese government will speed up approvals of infrastructure investments to buoy growth and its sluggish property sector provided little relief to investors at a time when steel producers and traders are wary of taking up iron ore cargoes, dragging down prices to the lowest in nearly six months.
  
"It looks like we're shaping up for a bit more pain in the short term," said Rory MacDonald, iron ore broker at Freight Investor Services. 
   
Chinese buyers are deferring or have defaulted on deliveries of iron ore as well as coal after a recent slide in prices, with Beijing's appetite for commodities slowing along with its economy.   
   
The most-traded rebar contract for October delivery on the Shanghai Futures Exchange eased 0.4 percent to close at 4,074 yuan ($640) per tonne.  
   
Construction-used rebar fell for a fifth straight week last week and is down nearly 5 percent so far in May. 
   
The surplus of steel in the market is weighing on prices as Chinese mills continue to produce at record rates to maintain their market share in the country's highly fragmented sector.
  
"Steel mill margins have really come to very, very thin levels and part of the problem is that the Chinese just don't seem to cut back on steel supply, which just exacerbates the problem," said Patrick Cleary, steel analyst at Wood Mackenzie. 
   
While the strategic nature of the Chinese steel industry is unlikely to change in the near term, Cleary said a sustained fall in iron ore prices fuelled by bearish sentiment could help ease the pressure on margins. 
     
HAND TO MOUTH 
   
The weakness in the steel market meant there was little buying interest for fresh seaborne cargoes, with mills opting for cheaper iron ore stockpiled at Chinese ports.
 
"It's all very hand to mouth at the moment and they can largely feed themselves from what's at the ports or by scaling back the volume that they're taking on contract," said MacDonald, who estimates port stocks to be about $5-$6 per tonne lower than fresh seaborne cargoes on average. 
   
Benchmark iron ore with 62 percent iron content.IO62-CNI=SI fell for a 10th consecutive day on Monday to hit $130.90 per tonne, the lowest since November 2011, according to data from the Steel Index.  
   
That was its longest losing streak since a 15-day slide in October, when iron ore slumped nearly 31 percent for the month
and forced mills to defer deliveries. 
   
Given ample supply of iron ore in the spot market, MacDonald said he thought prices may drop by another $5 per tonne "in the
very short term". 
   
Before its descent, iron ore hit this year's high of $149.40 in mid-April as traders bet on a seasonal uptick in China's
steel demand in the current quarter that has not come.  
   
Still, top miners continued to unload cargoes in the spot market, with BHP Billiton Ltd BLT.L> selling 190,000 tonnes of a combined cargo of Newman iron ore fines and MAC iron ore lumps at a tender on Tuesday, a Singapore-based trader said. 
   
Vale SA sold 170,000 tonnes of 63.75-percent grade iron ore fines at $134.05 per tonne at a tender on Monday, he said. 
   
Vale is selling iron ore about as fast as it can mine it despite a slowdown in China, the company's head of investor relations said on Monday, adding that the miner was not experiencing problems with orders.  
     
  Shanghai rebar futures and iron ore indexes at 0710 GMT
                                                                                                                  
  Contract                          Last    Change   Pct Change
  SHFE REBAR OCT2                   4074    -16.00        -0.39
  PLATTS 62 PCT INDEX             133.75     -0.50        -0.37
  THE STEEL INDEX 62 PCT INDEX     130.9     -0.40        -0.30
  METAL BULLETIN INDEX            131.41     -1.23        -0.93
                                                                                                                  
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.3279 Chinese yuan) 

 

Key Words:  China   steel   futures   weak demand    

Iron Ore-Spot at 6-mth Lows as Shanghai Rebar Stays Pressured

Industry News 10:05:26AM May 23, 2012 Source:SMM

* Ore extends decline to 10th day, longest since October
* Shanghai rebar falls for 5th time in seven sessions

(Updates rebar price) 

By Manolo Serapio Jr 

SINGAPORE, May 22 (Reuters) - China steel futures dropped for a fifth time in seven sessions on Tuesday as weak demand in the world's biggest consumer kept prices under pressure, curbing appetites for iron ore, which has fallen almost 10 percent so far this month. 
   
News that the Chinese government will speed up approvals of infrastructure investments to buoy growth and its sluggish property sector provided little relief to investors at a time when steel producers and traders are wary of taking up iron ore cargoes, dragging down prices to the lowest in nearly six months.
  
"It looks like we're shaping up for a bit more pain in the short term," said Rory MacDonald, iron ore broker at Freight Investor Services. 
   
Chinese buyers are deferring or have defaulted on deliveries of iron ore as well as coal after a recent slide in prices, with Beijing's appetite for commodities slowing along with its economy.   
   
The most-traded rebar contract for October delivery on the Shanghai Futures Exchange eased 0.4 percent to close at 4,074 yuan ($640) per tonne.  
   
Construction-used rebar fell for a fifth straight week last week and is down nearly 5 percent so far in May. 
   
The surplus of steel in the market is weighing on prices as Chinese mills continue to produce at record rates to maintain their market share in the country's highly fragmented sector.
  
"Steel mill margins have really come to very, very thin levels and part of the problem is that the Chinese just don't seem to cut back on steel supply, which just exacerbates the problem," said Patrick Cleary, steel analyst at Wood Mackenzie. 
   
While the strategic nature of the Chinese steel industry is unlikely to change in the near term, Cleary said a sustained fall in iron ore prices fuelled by bearish sentiment could help ease the pressure on margins. 
     
HAND TO MOUTH 
   
The weakness in the steel market meant there was little buying interest for fresh seaborne cargoes, with mills opting for cheaper iron ore stockpiled at Chinese ports.
 
"It's all very hand to mouth at the moment and they can largely feed themselves from what's at the ports or by scaling back the volume that they're taking on contract," said MacDonald, who estimates port stocks to be about $5-$6 per tonne lower than fresh seaborne cargoes on average. 
   
Benchmark iron ore with 62 percent iron content.IO62-CNI=SI fell for a 10th consecutive day on Monday to hit $130.90 per tonne, the lowest since November 2011, according to data from the Steel Index.  
   
That was its longest losing streak since a 15-day slide in October, when iron ore slumped nearly 31 percent for the month
and forced mills to defer deliveries. 
   
Given ample supply of iron ore in the spot market, MacDonald said he thought prices may drop by another $5 per tonne "in the
very short term". 
   
Before its descent, iron ore hit this year's high of $149.40 in mid-April as traders bet on a seasonal uptick in China's
steel demand in the current quarter that has not come.  
   
Still, top miners continued to unload cargoes in the spot market, with BHP Billiton Ltd BLT.L> selling 190,000 tonnes of a combined cargo of Newman iron ore fines and MAC iron ore lumps at a tender on Tuesday, a Singapore-based trader said. 
   
Vale SA sold 170,000 tonnes of 63.75-percent grade iron ore fines at $134.05 per tonne at a tender on Monday, he said. 
   
Vale is selling iron ore about as fast as it can mine it despite a slowdown in China, the company's head of investor relations said on Monday, adding that the miner was not experiencing problems with orders.  
     
  Shanghai rebar futures and iron ore indexes at 0710 GMT
                                                                                                                  
  Contract                          Last    Change   Pct Change
  SHFE REBAR OCT2                   4074    -16.00        -0.39
  PLATTS 62 PCT INDEX             133.75     -0.50        -0.37
  THE STEEL INDEX 62 PCT INDEX     130.9     -0.40        -0.30
  METAL BULLETIN INDEX            131.41     -1.23        -0.93
                                                                                                                  
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.3279 Chinese yuan) 

 

Key Words:  China   steel   futures   weak demand