Tue, 3 Dec 05:13:00 GMT
* Iron ore at 2-week top
* Stabilising Chinese economy boosts sentiment in steel
* Rio Tinto, Vale cut spending plans
By Manolo Serapio Jr
SINGAPORE, Dec 3 (Reuters) - Shanghai steel futures rose on Tuesday to their loftiest level since mid-October, reflecting a better outlook on demand as the economy shows signs of stabilising.
China's manufacturing activity remained at an 18-month high in November on firm domestic and foreign demand, according to a government survey released on Monday, with a separate gauge for the steel sector also showing improvement. [ID:nL4N0JE273]
The most-traded rebar for May delivery on the Shanghai Futures Exchange touched a session peak of 3,702 yuan
($608) a tonne, its highest since Oct. 15. It was up 0.2 percent at 3,693 yuan by midday.
Citing China's steel purchasing managers' index, in particular, UOB-Kay Hian Securities analyst Helen Lau said the marked recovery in the sub-index for new export orders was continuing to support sentiment.
China's steel PMI rebounded to 49 in November from 47.5 in October as the new export order sub-index climbed to 56 from 49.2, according to data compiled by the China Federation of Logistics and Purchasing.
"That was the surprise for us, the increase in new export orders which shows that the overseas market is getting better," said Lau.
"Overall, the Chinese economy is stabilising. So going forward, at least in the short term, together with seasonality, steel demand should stabilise."
The firmer steel market is sustaining buying interest for raw material iron ore, with spot prices rising to two-week highs.
Benchmark 62 percent grade iron ore for immediate delivery to China <.IO62-CNI=SI> gained 0.3 percent to $136.80 a tonne on Monday, the highest since Nov. 18, according to compiler Steel Index.
Colder weather in China, which curbs domestic mining of iron ore, is prodding steel producers to rely more on imported material, although ample supplies from main exporters such as Australia and smaller suppliers such as Venezuela and Sudan are keeping a lid on prices.
"There's still a lot of offers in the market and mills are getting more choices, whether mainstream or if they prefer to try out a brand from Sudan," said an iron ore trader in Shanghai.
"There's certainly no shortage of supply and I don't think mills are in a hurry to buy huge volumes."
More iron ore is expected to find its way into the market next year as top miners Vale and Rio Tinto boost production capacities. But they are slashing spending plans amid fragile commodity prices.
Rio Tinto said its expects to halve capital spending to $8 billion by 2015 from last year's level to cut debt, while Vale cut its investment budget for a third straight year, looking at $14.8 billion for 2014. [ID:nL4N0JI081] [ID:nL2N0JH0H0]
Iron ore exports to China from Australia's Port Hedland, which handles about a fifth of the global seaborne market, dropped to 22.3 million tonnes in November from a record 25.2 million tonnes in the previous month. But the shipments were up 38 percent from a year earlier. [ID:nL4N0JH3VF]
Shanghai rebar futures and iron ore indexes at 0438 GMT
Contract Last Change Pct Change
SHFE REBAR MAY4 3693 +7.00 +0.19
DALIAN IRON ORE MAY4 937 +1.00 +0.11
THE STEEL INDEX 62 PCT INDEX 136.8 +0.40 +0.29
METAL BULLETIN INDEX 137.31 +0.16 +0.12
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.0929 Chinese yuan)
(Editing by Muralikumar Anantharaman)
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