Shanghai rebar holds near 2-week top, iron ore restocking slow

2014-02-20

Shanghai steel futures hovered close to their highest levels in more than two weeks on Wednesday, supported by hopes of a seasonal pickup in demand in March that could keep iron ore prices firm in the near term.

Shanghai rebar has recovered almost 2 percent after hitting a record low last week as gains in spot Chinese steel prices suggested demand in the world's top steel consumer was perking up.

The most-traded rebar for May delivery on the Shanghai Futures Exchange touched a session high of 3,442 yuan

($570) a tonne, not far off Tuesday's peak of 3,463 yuan, which was the highest since Jan. 30. It was little changed at 3,437 yuan by midday.

Chinese steelmaker Yangang sold steel billet at 2,920 yuan a tonne at a tender on Wednesday, in line with current market levels but up from last week's 2,839 yuan, traders said.

Firmer steel prices have spurred buying interest in spot iron ore cargoes this week, with the benchmark 62 percent grade steady at $124.40 a tonne on Tuesday, according to data compiled by Steel Index.

More buyers returned to the spot market after the price slid to a seven-month low of $120 a tonne on Feb. 11, but traders say buying momentum may be losing some steam.

"I think the buying interest has cooled down and also it doesn't seem to me that there's been very strong restocking," said an iron ore trader in Shanghai.

"The price will probably stay at current levels, slightly above $120 for a while."

Stockpiles of imported iron ore at major Chinese ports surged to a record 100.25 million tonnes as of Feb. 14 , based on data from industry consultancy Steelhome, reflecting strong imports that hit a monthly record of 86.8 million tonnes in January.

The spike in imports and stockpiles is backed by the increasing use of iron ore as collateral to secure loans amid tight bank credit in China, trading sources say.

Morgan Stanley said while the inventory may be high, there are no signs of weak demand.

"We view the increased tonnage at China's ports as a re-stock ahead of the expected seasonal demand pickup. As the material held at ports is generally owned by traders, we think it is likely this segment of the market has been stockpiling in anticipation of an iron ore price rise," Morgan Stanley analyst Joel Crane said in a note.

Ahead of a typical pickup in construction demand next month, China's daily crude steel output rose 5.2 percent from late January to 2.066 million tonnes in the first 10 days of February.

Australia's Fortescue Metals Group , the world's No. 4 iron ore miner, said it expects Chinese demand to remain strong and sees prices trading between $110 and $120 a tonne, after its half-year net profit more than tripled.

Source from : Reuters

HEADLINES