By Manolo Serapio Jr
SINGAPORE, April 25 (Reuters) - Spot iron ore prices dropped
to the lowest in nearly five weeks as a soft outlook for steel
demand in top market China curbed buying interest, prompting
Chinese mills to sell some cargoes hoping to make quicker
Some Chinese steel producers such as Baosteel Group , which are traditionally buyers of iron ore, have
trading units that allow them to also unload cargoes into the
'With the steel market not so good, these mills can probably
get their money back quickly if they resell iron ore instead of
using them to produce steel,' said a shipping manager for an
iron ore trading firm in Shanghai.
'Some mills are offering their cargo in the market which
means that they have more than enough supply for their current
China's steel market is slated to remain weak in May,
traditionally a peak consumption period, with downstream demand
still uncertain and prices expected to remain low, the country's
steel industry association warned on Thursday.
Benchmark 62 percent grade iron ore fell
nearly 1 percent to $135.10 a tonne on Wednesday, according to
data provider Steel Index.
That is iron ore's cheapest level since March 21 and puts it
not very far from its 2013 low of $132.90 touched in mid-March.
The price of the main ingredient for steel has fallen 15 percent
from this year's peak.
Even as they keep their steel production high, many small to
midsize mills which typically buy iron ore off the spot market,
are limiting their iron ore inventories.
Stockpiles of iron ore at 25 major Chinese ports stood at
71.1 million tonnes as of April 22, up by 570,000 tonnes from
the previous week, according to the Xinhua news agency.
While the level remains well below the nearly 96 million
tonnes in late November, the latest increase in port inventories
reflects slack demand from buyers, traders said.
'Some steel mills in Shandong told me that many are making a
loss between several tens to 200 yuan amid lukewarm demand and
falling steel prices,' said a Shanghai-based iron ore trader.
'Iron ore prices are softening even when supply is tight, so
they are likely to fall further given expected supply increases
in May and June,' he said.
Traders expect seaborne supply to rise over the next two
months as production in top miners Australia and Brazil rebound
after cyclones and rains disrupted first-quarter output.
Brazil's Vale, the world's biggest iron ore
producer, reported an 18 percent drop in first-quarter net
profit as lower sales countered cost cuts.
Shanghai rebar futures rose 1.2 percent to 3,659
yuan ($590) a tonne on Thursday. But they remain 6 percent below
April highs, after hitting a 7-1/2-month trough of 3,578 yuan
per tonne on Wednesday.
Traders are not too optimistic that the iron ore market will
bounce back after a long weekend in China. Chinese markets are
shut from April 29 to May 1 for public holidays.
'Though steel mills are holding low inventories, they are
still reluctant to take large cargoes due to tight cash flow and
the anticipation of weak market demand,' said another trader in
Shanghai rebar futures and iron ore indexes at 0405 GMT
Contract Last Change Pct Change
SHFE REBAR OCT3 3659 +42.00 +1.16
THE STEEL INDEX 62 PCT INDEX 135.1 -1.30 -0.95
METAL BULLETIN INDEX 136.64 +0.00 +0.00
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.1781 Chinese yuan)
(Additional reporting by Ruby Lian in SHANGHAI; Editing by
Keywords: MARKETS IRONORE/
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