SINGAPORE, Aug 2: Spot iron ore prices dropped to their lowest in more than two weeks and were headed for their steepest weekly loss since May, as buying by top consumer China lost steam after recent restocking.
Shanghai steel futures tracked equities higher on Friday, but were set to end the week flat, constrained by a hazy outlook for Chinese demand for the rest of the 2013.
Iron ore with 62 percent iron content <.IO62-CNI=SI>, the industry benchmark, slipped 0.2 percent to $129.70 a tonne on Thursday, its weakest since July 16, based on the latest available data published by compiler Steel Index.
The price of iron ore, the biggest revenue earner for top miners Vale and Rio Tinto , is down 2.2 percent so far for the week, the steepest decline since late May and following a four-week rally that lifted prices to near three-month highs above $132.
‘I think we’re seeing a healthy correction. Iron ore has become a bit expensive so there’s some slowdown in spot demand,’ said an iron ore trader in Hong Kong.
‘But I’m still getting inquiries from both mills and traders looking to buy iron ore, so they are just waiting for prices to drop further.’
At current steel and iron ore prices, mills are probably at least breaking even, the trader said, as opposed to recent losses.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange rose 0.6 percent to 3,670 yuan ($600) a tonne by the midday break. It hit a three-week low of 3,613 yuan on Wednesday.
China’s steel demand will likely stay soft for the rest of the year, the country’s industry group said on Wednesday, after reporting that its members – 86 steel mills – incurred a combined loss of 669 million yuan in June.
Despite recent losses, iron ore prices should find immediate support at $128 a tonne, said a Shanghai-based trader, with high-grade spot cargoes still relatively limited and Chinese steel production likely to remain high as mills prepare for the peak consumption period in September and October.
Iron ore swaps were firm on Friday, reflecting market expectations that physical prices would bounce back, traders said.
The August contract was trading at $127.50-$128.50 a tonne after closing at $127.12 on Thursday, while September was dealt between $125 and $126, up from the previous close of $124.44, traders said. Shanghai rebar futures and iron ore indexes at 0405 GMT
Contract Last Change Pct Change SHFE REBAR JAN4 3670 +21.00 +0.58 THE STEEL INDEX 62 PCT INDEX 129.7 -0.20 -0.15 METAL BULLETIN INDEX 130.43 -0.20 -0.15
Rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.1305 Chinese yuan)
(AGENCIES)
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