SINGAPORE, Apr 12: Iron ore steadied near a one-month high above $140 a tonne and was on course for its biggest weekly gain since January, as firmer spot steel prices in top consumer China backed restocking efforts.
The price of the steelmaking ingredient has recovered 6 percent from this year’s low touched in mid-March, but with its fate closely linked to steel, the upturn in iron ore prices will only be sustained if Chinese steel demand strengthens.
‘We feel there is a bit more upside to iron ore prices. There are more enquiries and deals are concluding faster. Spot supply is also tight,’ a Shanghai-based trader said.
Benchmark 62-percent grade iron ore <.IO62-CNI=SI> rose 0.2 percent to $140.90 a tonne on Thursday, its loftiest since March 12, based on data from the Steel Index.
For the week so far, it is up 3.7 percent, its biggest weekly rise since gaining nearly 10 percent in early January.
Gains in steel prices spurred buying interest in iron ore. Steel billet in China’s key Tangshan area has risen by 40 yuan so far this week to 3,290 yuan ($530) per tonne on Thursday, while Shanghai rebar futures are up more than 1 percent for the week.
Steel consumption in China, the world’s largest user and producer, usually peaks during the second quarter as construction activity quickens after the winter freeze.
China, which represents half of global steel demand, will remain a key driver in world consumption this year, but growth will moderate in the longer run, the World Steel Association said on Thursday.
It expects global steel demand to grow by 2.9 percent to 1.454 billion tonnes in 2013, a tad lower from its October forecast of 1.455 billion tonnes.
BAOSTEEL HALTS PRICE HIKES
But a move by Baoshan Iron and Steel to keep prices for May steady after lifting them for five months in a row suggests China’s largest listed steelmaker is uncertain about the demand outlook.
Steel inventories held by major Chinese producers hovered around record levels of almost 15 million tonnes as of mid-March, reflecting tepid demand. Nonetheless, steel mills continue to produce at a rate of more than 2 million tonnes of crude steel a day, hoping demand will pick up pace.
‘The fact that Baosteel did not cut prices suggests that they still expect consumption to rise,’ said an iron ore trader in Hong Kong. ‘I wouldn’t be too worried.’
Still, activity in the physical iron ore market has slowed compared to earlier in the week, with bids scarce on Friday.
There were three Australian cargoes on offer via the China Beijing International Mining Exchange platform and another on Singapore-based GlobalOre, with the volume totalling more than 500,000 tonnes, traders said.
Shanghai rebar futures and iron ore indexes at 0415 GMT. (agencies)
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