Iron ore bounced back strongly after more than a week of losses
Iron ore bounced back strongly after more than a week of losses as falling prices encouraged some steel mills in China to return to the market, although sluggish steel demand in the world’s biggest consumer may limit the recovery.
Iron ore with 62 percent iron content rose more than 2 percent to $133.60 a tonne on Thursday, cost and freight delivered to China, said the Steel Index .IO62-CNI=SI.
“Some steel mills have started buying ore marginally which could support iron ore prices for a while, but it will be a weak rebound because fundamentally, steel demand remains weak,” said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.
With construction activity in China normally slowing in winter and credit access for steel mills not improving sharply, ”it’s very unlikely to see iron ore prices surging above $150,” he said.
Highlighting slow demand for steel in China, also the world’s biggest producer, average daily output of crude steel stood at 1.664 million tonnes over Nov. 11-20, unchanged from the previous 10 days, according to data from the China Iron and Steel Association on Tuesday.
Liu said it still remains to be seen whether China’s move to cut bank reserve requirements would boost liquidity enough to benefit steel mills faced with tight loan access and poor steel demand.
“The question is will this additional liquidity reach the real end-users? Are the banks willing to lend money?,” he asked.
China’s central bank cut reserve requirements for commercial lenders on Wednesday for the first time in three years, a policy shift to ease credit strains and shore up an economy running at its weakest pace since 2009.
The half percentage point cut takes effect on Dec. 5.
A steep rise in prices of iron ore forward swaps on Thursday reflected market expectations for a further increase in spot rates, with all contracts rising, and by as much as $8 a tonne.
Volume cleared by the Singapore Exchange, where bulk of the globally traded swaps are cleared, rose to 409,000 tonnes from 294,500 tonnes on Wednesday.
Offer prices to sell imported iron ore in China rose for a second day on Friday as traders and miners upped rates with inquiries picking up.
Australian Pilbara iron ore fines were quoted at $134-$136 a tonne, C&F, up $2 from Thursday while Newman fines also rose $2 to $138-$140, said Chinese consultancy Umetal.
Indian 63.5/63-percent grade iron ore fines increased a dollar to $144-$146 a tonne, said Umetal.
“We can only say the market seems to be better, but the buying activity is still low and steel mills will need to repay bank loans by year-end,” said an iron ore trader in Beijing.
The most-traded May rebar contract on the Shanghai Futures Exchange eased 0.3 percent to close at 4,163 yuan a tonne.
For the week, rebar rose 2.9 percent after rising the most in three weeks on Thursday following China’s bank reserve cut.
It was rebar’s best weekly gain since the last week of October. – Reuters
Shanghai rebar futures and iron ore indexes at 0732 GMT Contract Last Change Pct Change SHANGHAI REBAR* 4163 -11.00 -0.26 PLATTS 62 PCT INDEX 136 1.00 0.74 THE STEEL INDEX 62 PCT INDEX 133.6 2.70 2.06 METAL BULLETIN INDEX 133.78 1.17 0.88 *In yuan/tonne #Index in dollars/tonne, show close for the previous trading day
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