Iron Ore-Spot prices, Shanghai rebar steady after gains

Tue Jul 19, 2011

* Optimism on China's steel demand intact
* Iron ore indexes flat to lower
By Manolo Serapio Jr

SINGAPORE/SHANGHAI, July 19 (Reuters) - Spot iron ore prices and Chinese steel futures steadied on Tuesday as buyers cast doubt on the sustainability of recent gains even as the long-term outlook remained upbeat.

Rebar futures in Shanghai have rebounded from three-month lows in June to hit their highest level since May on Monday on expectations China's drive to boost low-cost housing units will lift demand for construction steel in the second half of 2011.

"I am worried it's too early to be optimistic. The season for strong steel consumption hasn't come yet and the rise in steel prices does not seem solid amid tighter liquidity," said an iron ore trader in Shenzhen.

"Steel mills have built too much stocks over the past two weeks, so iron ore prices in the short term are still uncertain."

The most active October rebar contract on the Shanghai Futures Exchange was nearly flat at 4,906 yuan per tonne by 0530 GMT, after hitting a high of 4,915 yuan, near Monday's peak of 4,925 yuan.

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

"I think the market's taking a breather. Iron ore prices have gone up too fast too soon and there has to be stronger evidence of steel consumption in China if people want to push prices further up," said an iron ore trader in Singapore.

Iron ore indexes, which track spot deals in China and which global miners use as benchmark to set quarterly contract prices, were flat to lower on Monday, after mostly rising since the start of July.

The Steel Index's 62-grade measure .IO62-CNI=SI eased 20 cents to $174.40 a tonne and a similar benchmark by Metal Bulletin .IO62-CNO=MB slipped 11 cents to $173.95.

Platts index IODBZ00-PLT was steady at $176.

But traders expect China, the world's No. 1 iron ore buyer, to continue buying more of the steelmaking raw material as mills look forward to increased steel demand from the government's social housing push and infrastructure investment.

"In the second half of this year, the overall iron ore import market should go well," said the Shenzhen trader.

China has imported 334.25 million tonnes of iron ore in January to June, up around 8 percent from a year ago, according to government data. If the current pace is sustained, imports are bound to hit a record near 670 million tonnes for the full year.

Gains in prices of forward swaps reflected optimism about Chinese demand, with Singapore Exchange-cleared contracts from July 2011 through December 2013 racing higher on Monday.

(By Reuters)