SINGAPORE, Jan 28: More restocking by Chinese steelmakers and limited spot cargoes may nudge iron ore prices higher this week, though gains will be capped with buyers not keen on chasing pricey cargoes and sellers willing to wait until after the February holiday.
Some steel mills from China, the biggest buyer of the world’s iron ore, are still replenishing stockpiles ahead of the week-long Lunar New Year break next month, traders said, but were not desperate to buy at any price.
‘Some mills are willing to take additional cargo if the price offered is lower than the market. Otherwise, they can wait,’ said a purchasing manager for an iron ore trading firm in Shanghai.
Those keen on buying are looking at $143-$144 per tonne for 62 percent grade iron ore, he said. That is around $5-$6 cheaper than Friday’s market price of $148.60 <.IO62-CNI=SI> per tonne, based on data from Steel Index.
The price was unchanged on Friday, but still managed to end last week 2.4 percent higher versus the previous week, its seventh such gain out of eight.
‘Sellers who have cargoes are also not willing to sell and can wait until after the Chinese New Year,’ said the manager whose firm is keen on holding on to stocks of less than 100,000 tonnes held at ports due to low bids from mills.
The limited cargoes being offered in the spot market should also support prices, with rains curbing shipments from top suppliers Australia and Brazil, traders said. Ports in Australia were shut briefly this month due to storms.
‘But it looks difficult this time that it will go near $160 again,’ said a Singapore-based trader, adding prices will likely trade in narrow ranges just before the Chinese holiday.
SQUEEZED MARGINS
Iron ore hit a 15-month high of $158.50 on Jan. 8 in a rally that began in December as Chinese buyers rebuilt stockpiles anticipating steel demand to pick up pace along with the overall economy.
China’s manufacturing activity rose at its quickest clip in two years in January, according to a preliminary gauge by HSBC last week, raising hopes the world’s No. 2 economy will see faster growth this year.
But China’s steel output apparently slowed down slightly in mid-January after rising during the early part of the month, according to an industry association’s estimate, in what analysts say reflects pressure on profit margins from higher raw material costs.
Average daily crude steel production stood at 1.914 million tonnes in Jan. 11-20, down 1.5 percent from the previous 10 days, the China Iron and Steel Association said on Friday.
‘Squeezed margins – especially at the smaller, private long product producers – and some impact of recent pollution issues in Beijing – are probably driving the cuts,’ Steel Market Intelligence said in a note.
Despite rising to seven-month highs last week, Shanghai steel rebar futures have only gained by over a quarter since September lows. Iron ore, despite its drop from 15-month peaks, remains up more than 70 percent from September lows.
(agencies)
Follow our WhatsApp channel