Iron Ore-Spot prices steady for third day, traders cautious

Thu Apr 14, 2011 4:15am GMT

* Iron ore price stood unchanged at $188-190/T
* Shanghai rebar slipped after short-lived rebound
* Traders splitting views, still cautious
* Singapore ore swaps fell further

By Ruby Lian and Jacqueline Wong

SHANGHAI, April 14 (Reuters) - Spot offers of iron ore to top buyer China stood unchanged for a third consecutive day on Thursday after hitting $190 per tonne, with traders watching for clearer guidance on near-term market direction.

Trade in Shanghai rebar futures was volatile this week, triggering growing caution among iron ore traders.

"The market view is largely split after fast gains in iron ore prices over past few weeks, but I still expect prices to stabilise in the coming days," said an iron ore trader in coastal Shandong province.

Small and medium-sized Chinese steel mills, facing tight credit liquidity, are less keen to rebuild up stocks after prices surged 12 percent from mid-March.

"Credit liquidity is not as ample as before, and some steel mills are only purchasing small amounts to meet urgent needs," said another iron ore trader in Shanghai.

Offers of Indian ore with 63.5-percent iron content were steady at $188-190 per tonne, including freight, on Thursday, industry consultancy Mysteel said.

Major iron ore indexes, reflecting spot prices and used by global miners in determining supply contracts, stabilised on Wednesday.

The Steel Index's 62 percent benchmark .IO62-CNI=SI stayed unchanged at $181.90 per tonne after slipping 0.6 percent on Tuesday, and Platts 62 percent iron ore index IODBZ00-PLT was unchanged for a third day at $184.50.

Metal Bulletin's 62 percent index .IO62-CNO=MB eased $1.25 to $181.19 per tonne on Wednesday.

FIRM PROSPECT AMID CAUTION

Analysts expect the supply tightness of the key steelmaking ingredient to support prices, and miners are bullish on strong demand from China in the second quarter.

"I think iron ore prices could come off near term, but they have to stay high and could easily go higher before the end of the second quarter. There is no inventory and the seaborne market is tight," said Graeme Train, analyst with Macquarie Commodities Research.

Global miner Rio Tinto's said its sales of iron ore and coal to disaster-stricken Japan are starting to recover slightly.

Traders said some miners plan to raise offers of iron ore in May in anticipation of strong demand from China.

The National Development and Reform Commission (NDRC), China's economy watchdog, warned that some Chinese steel mills have already suspended iron ore imports to mitigate cost pressure, it said on its website on Thursday.

The continued rise seen in iron ore prices has seriously squeezed the margins of Chinese steel mills, with big mills suffering a profitability ratio of only 3 percent, NDRC said.

SWAPS FELL, COKE FUTURES TO DEBUT

Iron ore swaps cleared by the Singapore Exchange <0#SGXIOS:> extended losses on Wednesday.

The April contract fell $1.63 to $178.25 per tonne, May edged down $2.5 to $170.75 per tonne and June slid $1.87 to $167.63 per tonne.

Shanghai rebar futures fell modestly on Thursday after a short-lived rebound in the afternoon session on Wednesday.

The benchmark rebar futures October contract, the most-traded on the Shanghai Futures Exchange, reached 4,931 yuan ($754.7) per tonne, an about seven-week high, but eased to 4,911 yuan per tonne by midday break.

China's Dalian Commodity Exchange will start trading of the world's first coke futures on Friday, providing a financial derivative tool for steelmakers and coke producers to hedge another major steelmaking ingredient. ($1 = 6.533 Chinese yuan) (Editing by Ed Lane, sourced Thomson Reuters)