SINGAPORE, July 9: Spot iron ore prices retreated from six-week peaks as buying interest from top importer China eased, although a limited supply of high-grade cargoes may keep losses in check.
Iron ore is down nearly 16 percent this year as a slower economy curbs China’s appetite for the raw material, while faster-than-forecast inflation in June suggests Beijing does not have the room to loosen monetary policy to lift the economy.
Benchmark 62-percent grade iron ore <.IO62-CNI=SI> dropped 0.6 percent to $121.90 a tonne on Monday, according to data provider Steel Index. For the year, iron ore looks to be on track for its second annual loss in three years.
The price hit a six-week top of $122.60 on Friday as Chinese mills refilled run-down inventories.
‘There has been some shortage of high-grade cargoes, those at 60-percent plus, so the market should be holding up,’ said an iron ore trader in Shanghai.
‘But demand hasn’t been that strong either, and the shortage should ease in August when more Australian cargoes come through to spot.’
Traders are eyeing a sale tender later on Tuesday by global miner Rio Tinto for a cargo of 61.4-percent grade Australian iron ore fines for pricing cues.
A similar grade cargo traded on the globalORE platform on Monday at $118.50 a tonne, well below last week’s levels, traders said.
A second physical iron ore trading platform in China begins operations on Tuesday, competing with the existing China
Beijing International Mining Exchange (CBMX). The new Rizhao-based platform will initially settle trades mainly in yuan.
‘There’s no reason why this platform won’t work, but drawing in liquidity won’t happen overnight,’ said the Shanghai
trader.
The latest platform is a further sign that Beijing is relaxing its tight grip over imports of the raw material, its biggest by volume. CBMX began its platform in May 2012.
Shanghai rebar futures were little changed at 3,594 yuan ($590) a tonne by the midday break, holding near six-week highs above 3,600 yuan touched last week.
Steel inventories at Chinese warehouses fell below 15 million tonnes last week to 14.73 million tonnes, down by 330,000 tonnes from the previous week, Standard Bank said.
‘This suggests inventories are finally back in good shape, relative to underlying demand, with mills finally able to extract some pricing power with end consumers, as evidenced by last week’s rally in physical steel pricing,’ Standard Bank said in a note.
Shanghai rebar futures and iron ore indexes at 0343 GMT
Contract Last Change Pct Change
SHFE REBAR JAN4 3594 -1.00 -0.03
THE STEEL INDEX 62 PCT INDEX 121.9 -0.70 -0.57
METAL BULLETIN INDEX 120.21 -4.24 -3.41
Rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.1337 Chinese yuan)
(agencies)
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