Iron Ore-Spot prices dip as Chinese buying slows

Tue May 10, 2011 6:56am GMT

* Physical market seen on "temporary switch-off"
* Indian 63.5 ore quoted at $187-$189/T-Umetal
* China April iron ore imports fall 11.1 pct vs March
By Manolo Serapio Jr

SINGAPORE, May 10 (Reuters) - Spot iron ore prices slipped with demand from top buyer China remaining slow as steelmakers waited for further price declines, although offers for the steelmaking raw material were steady on Tuesday.

Indian ore with 63.5 percent iron content was quoted at $187-$189 a tonne, including freight, in China on Tuesday, unchanged from the previous day, Chinese consultancy Umetal said.

"Purchases are getting less. People want to wait and see whether prices will drop further," said an iron ore trader in Shenzhen.

"Chinese mills have some stocks at the moment so they don't need to hurry to get cargo. But I'm sure they will buy again, may be by the end of this month or at the start of June.

Demand from Chinese steelmakers along with tight supplies had helped spot iron ore prices rise to record highs near $200 a tonne in February. But prices have struggled to keep gains since then as Chinese appetite eased given slow demand for steel.

"The physical iron ore market uncertainty prevailed as it enters a new week with the downward inertia of last week," London Dry Bulk said in a note.

"The present silence is being taken as a temporary switch-off," it said, adding traders were not seeing a sharp drop in prices.

Iron ore indexes, which follow the Chinese spot market and are used by global miners like Vale and Rio Tinto in pricing supply contracts, extended losses on Monday.

Platts 62 percent iron ore index IODBZ00-PLT eased 50 cents to $182 a tonne, lowest since April 26.

A similar benchmark by Steel Index .IO62-CNI=SI slipped a dollar to $179.70, while Metal Bulletin's 62 percent gauge .IO62-CNO=MB dropped 78 cents to $180.92, both indexes at their lowest since April 27.

Uncertainty over the outlook for steel demand has prompted Baoshan Iron & Steel to keep prices of its main steel products unchanged for June bookings.

Baosteel's move comes after price cuts in May which was its first reduction in nine months.

Chinese steelmakers look to steel prices when deciding on import plans for iron ore, the key steelmaking ingredient.

Data on Tuesday showed China's iron ore imports fell more than 11 percent to 52.88 million tonnes in April from the previous month.

Shanghai rebar futures were modestly higher on Tuesday, but stayed near two-week lows touched on Monday. The most active October contract on the Shanghai Futures Exchange gained 0.1 percent to 4,836 yuan per tonne by 0625 GMT. (Editing by Himani Sarkar, sourced Thomson Reuters)