Iron Ore-Spot offers steady; no spike in summer prices seen

Thu Jul 21, 2011

* Traders expect no big rise in iron ore prices before Sept
* Global iron ore indexes vary
* Iron ore swaps rise

SHANGHAI, July 21 (Reuters) - Spot iron ore prices steadied on Thursday, with strong construction steel production continuing to offset the seasonal lull in higher-end steel demand.

Global steel production in June rose 8 percent to 127.746 million tonnes from a year earlier, driven by China, which accounted for 47 percent of the total.

While the industry typically downs tools in the hot summer months, the planned construction of 10 million affordable houses in China this year is expected to keep run rates at close to record levels.

"Steel demand will pick up largely in September, which will see iron ore prices facing a solid rise relatively long-term from then," said an iron ore trader in Beijing.

However, tightened monetary policy and thin demand for flat steel products used in automobiles and manufacturing are likely to trim any gains in iron ore prices.

"Steel demand will not improve greatly before September, so I don't expect iron ore prices to see a big spike in July or August," said the trader.

Spot offers for iron ore were steady again, with Australian 62-grade Newman fines quoted at $179-$181 a tonne, including freight, and Indian 63.5/63 fines offered at $182-$184, according to Chinese consultancy Umetal.

October rebar contracts on the Shanghai Futures Exchange , the most active on the market, dipped 0.22 percent to 4,913 yuan ($761) per tonne on Thursday, still close to its highest in more than two months.

Trading sources said steel mills have begun resisting 63.5 percent Indian ores at $182 per tonne, including freight, with transactions sealed around 50 cents lower.

Fitch Ratings said last week that it expected slower growth in steel demand and production during the second half of 2011 as developing nations fight inflation and developed nations address fiscal instability.

Iron ore indexes, tracking spot deals in China and used by global miners as the basis for quarterly contract prices, were mixed again on Wednesday.

The Steel Index's 62-grade measure .IO62-CNI=SI edged up 20 cents to $174.60 a tonne while Metal Bulletin's similar benchmark .IO62-CNO=MB lost 54 cents to $173.28.

The Platts index IODBZ00-PLT remained unchanged at $176.5.

However, Singapore Exchange-cleared iron ore swap contracts <0#SGXIOS:> rebounded across the board. ($1 = 6.459 yuan)