By Manolo Serapio Jr
SINGAPORE, Feb 18 (Reuters) - Shanghai steel futures fell on
Monday to their lowest since late January as investors trimmed
expectations for an immediate pickup in Chinese steel demand on
the first trading day after a week-long Lunar New Year break.
Weaker steel prices usually translate to slower demand for
iron ore, but some Chinese mills may restock on the raw material
after the long holiday which should support prices. Traders are
watching a tender for Australian iron ore fines for any
indication of market direction.
The most traded rebar contract for October delivery on the
Shanghai Futures Exchange hit a session low of 4,192
yuan ($670) a tonne, its weakest since Jan. 29. It was down 1.7
percent at 4,202 yuan by the midday break.
Rebar, used in construction, rose to nine-month highs the
week before China went on holiday on expectations steel demand
in the world's biggest consumer and producer would turn brisk
after the break.
'We expect steel consumption to pick up from March onwards
when we will see more construction activities,' said a
Shanghai-based iron ore trader. Most migrant workers in China
are only returning to work next week, the trader added.
The decline in Shanghai rebar prices weighed on sentiment
towards iron ore swaps, which gained last week in
anticipation physical prices will ounce back.
The second-quarter contract traded at $144.50 a tonne, down
from Friday's settlement of $146, while the third-quarter
contract slipped to $138.50 from $139.21, brokers said. The
swaps are cleared by top global clearer Singapore Exchange.
Some traders are bracing for firmer prices in the spot
market, with several Australian and Ukrainian cargoes on tender.
Rio Tinto is offering 165,000 tonnes of
61.5-percent grade Australian Pilbara iron ore fines at a tender
closing later on Monday.
'The Pilbara fines will be the bellwether for what's going
to happen in the market,' said a Singapore trader.
Some in China expect steel mills to replenish iron ore
stockpiles that may have dropped during the holidays, that may
push prices higher.
'There could be some restocking after the holiday. Mills may
do it with caution, but some traders could be aggressive,' said
another trader in Shanghai who sees the Pilbara fines being sold
at $155-$156 per tonne from a previous sale of around $153.
Rio is also offering a cargo of 64.5-percent grade PMC iron
ore concentrate, while Ukrainian miner Metinvest is offering
five cargoes of concentrates with grades ranging from 65 and 67
percent, traders said.
Benchmark 62-percent grade iron ore was
unchanged at $155.10 a tonne last week, according to data
provider Steel Index.
Shanghai rebar futures and iron ore indexes at 0407 GMT
Contract Last Change Pct Change
SHFE REBAR OCT3 4202 -73.00 -1.71
THE STEEL INDEX 62 PCT INDEX 155.1 +0.00 +0.00
METAL BULLETIN INDEX 155.89 +0.00 +0.00
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2325 Chinese yuan)
(Reporting by Manolo Serapio Jr.; Editing by Tom Hogue)
Keywords: MARKETS IRONORE/
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