SINGAPORE, July 16: Spot iron ore prices edged up to two-month highs backed by Chinese steel mills replenishing raw material inventories, although the pace of restocking may have slowed, suggesting a two-week rally may soon end.
Offers for imported iron ore cargoes in China, the world’s biggest importer of the commodity, remained firm on Tuesday but traders said buyers were scarce after a bout of spot purchases lifted prices by almost 9 percent since July began.
Ore with 62 percent iron content <.IO62-CNI=SI> gained 10 cents to $126.90 a tonne on Monday, the highest since May 14, according to data provider Steel Index.
‘Those who are not in urgent need of cargo will probably wait for prices to fall before buying again,’ said an iron ore trader in China’s eastern Shandong province who stopped buying cargoes after prices passed $125 a tonne.
‘We think it’s risky at this point since the steel market is not as good as it looks from recent price increases.’
The price of iron ore, the biggest revenue earner for global miners such as Vale and Rio Tinto , remains 20 percent below a 16-month peak of $158.90 reached in February as a slower economy curbed Chinese demand.
Citing deteriorating market conditions, Glencore Xstrata Plc said it will halt production of iron ore in Australia next month. It had been producing 1 million tonnes of iron ore concentrate a year as a by-product from its Ernest Henry copper mine in northeast Australia since mid-2011.
Recent gains in steel prices have feed an appetite for iron ore although Shanghai steel futures have steadied after rising by 3.8 percent in the past two weeks.
The most briskly traded rebar contract for January delivery on the Shanghai Futures Exchange was little changed at 3,674 yuan ($600) a tonne by the midday break, after settling at 3,675 yuan on Monday.
While steel demand appeared to be firm in the early days of the month, there are concerns it could slip as construction projects in China slow during summer.
‘We were not really sure whether the steel that was bought recently is being consumed or stocked in traders’ warehouses. It’s been very hot in Shanghai and in most parts of China and under such weather, no construction work may be possible,’ said an iron ore trader in Shanghai.
(agencies)
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