Iron-ore heads for third weekly fall as Chinese buyers cautious

2013-03-10

Iron-ore prices were stead on Friday but were on track for a third consecutive week of losses as well-stocked Chinese steel mills mostly kept their hands off spot cargoes with steel demand yet to pick up pace.

Shanghai rebar futures were on course to fall for a fourth straight trading week after hitting near three-month lows on Monday on worries China's latest efforts to cool its property sector may dent demand for the construction steel product.

Price offers for imported iron ore cargoes in China were little changed on Friday, with scant buying interest, traders said.

"There are some buyers who are back in the market, but majority is still quite cautious," said a physical iron ore trader in Shanghai.

Inventory of iron ore among many steel mills in China are probably at about 25-30 days worth of consumption, which remains relatively high, he said.

Benchmark 62% grade iron-ore edged up 50c to $146.30 /t on Thursday, according to Steel Index.

But it is still down nearly 3% for the week having fallen to six-week lows on Tuesday.

Trade data from China showed exports jumped by a fifth in February from a year earlier, more than double expectations, although imports were much weaker than forecast.

CHINA ORE IMPORTS FALL

China's iron-ore imports dropped to a four-month low of 56.42-million tons in February because of the Lunar New Year holiday.

Analysts say high prices may have also turned off some buyers. Iron-ore rose to a 16-month high of $158.90 on February 20, the second time this year that prices neared $160.

"When iron-ore prices reach above $150 /t, steel mills tend to be more cautious," said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.

"They have changed their behaviour, they have become quite cautious about buying iron ore in large volumes and they would rather keep their inventory low," said Liu, adding he expects China's monthly iron ore imports to stay at around 55-million to 60-million tons going forward.

Standard Bank expects prices to rally back above current levels later in the month before heading lower.

"We believe that ore prices will trade in the $115 to $160 range this year, averaging $132. Although many are focusing on upcoming supply additions, we believe that these will take significant time to ramp up to full capacity, well into 2014," Standard Bank analyst Melinda Moore wrote in a note to clients.

Iron-ore swaps were also steady on Friday. The April contract traded at $138.50 /t, nearly flat from Thursday's settlement, brokers said.

The most traded rebar contract for October delivery on the Shanghai Futures Exchange was up 5 yuan at 3 937 yuan ($630/t) a ton by the midday break. The contract was down 2% for the week so far.

Source: Reuters

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