By Manolo Serapio Jr
SINGAPORE, May 20 (Reuters) - Spot iron ore prices may
stretch their losses this week as Chinese mills curb their
inventories of the raw material amid an uncertain outlook for
steel demand in the world's top consumer.
Shanghai rebar futures tracked equities higher on Monday,
after having fallen to eight-month lows in the previous session
amid slow demand during what is normally a peak consumption
season as the overall economy grows at a modest pace.
Data showing China's housing inflation quickened to a
two-year high in April was unlikely to lift steel demand from
real estate given Beijing's sustained efforts at cooling the
'The demand for real estate is still high, but it doesn't
indicate that the number of new real estate projects is high,'
said a Shanghai-based iron ore trader.
'Developers are still reluctant to start new projects. The
only thing they are doing now is buying more land and waiting
for the change in the current tight policy on real estate.'
The most actively traded rebar contract for October delivery
on the Shanghai Futures Exchange rose 1.2 percent to
3,619 yuan ($590) a tonne by the midday break. It fell to as low
as 3,523 yuan on Friday, its weakest since last September.
Rebar's gain may at best help stabilise sentiment in the
iron ore market where prices fell for a fourth week out of five
last week as buyers who were wary about the outlook for steel
demand bid down cargoes.
'The bearish sentiment persists, but it's not going to be as
bad as last week,' said a Hong Kong-based trader.
'One important thing to remember is that while many mills
are making losses, steel production remains high which means
some people are still trying to buy (iron ore) cargo.'
Daily crude steel output in China, which makes about half
the world's steel, averaged at a record high of 2.193 million
tonnes in the first 10 days of May, data from the China Iron and
Steel Association showed on Friday.
Even when stockpiles of steel products in China hit record
levels above 22 million tonnes in March due to soft demand,
China's legion of steel producers kept production lines humming
as they fought to protect their market share in a fragmented
Iron ore with 62 percent iron content dropped
1.5 percent to $123.10 a tonne on Friday, the lowest level since
Dec. 7, 2012, according to data provider Steel Index.
Iron ore prices have fallen nearly 23 percent from this
year's peak of close to $160 a tonne.
'We might see support at $120. The price has fallen a lot in
recent weeks and more mills may be comfortable to buy at this
price level,' the Hong Kong trader said.
Still, any rebound may be short-lived as Chinese steel
producers try to manage inventories. Some of the big mills have
been unloading part of their contracted cargoes on the spot
Shanghai rebar futures and iron ore indexes at 0411 GMT
Contract Last Change Pct Change
SHFE REBAR OCT3 3619 +41.00 +1.15
THE STEEL INDEX 62 PCT INDEX 123.1 -1.90 -1.52
METAL BULLETIN INDEX 123.23 +0.00 +0.00
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.1419 Chinese yuan)
(Editing by Himani Sarkar)
Keywords: MARKETS IRONORE/
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