Iron Ore-Shanghai rebar gains for 5th day in six, ore rises

Wed Aug 17, 2011

* Chinese mills returning to iron ore market, lifting prices
* BHP sells Newman fines at $182.50/T vs $180.93 last week
* Rio Tinto halts operations at 2 mines after fatality (Updates rebar price)
By Manolo Serapio Jr

SINGAPORE, Aug 17 (Reuters) - Shanghai steel futures rose for a fifth time in six sessions on Wednesday, supported by hopes that demand from top consumer China will stay strong, boosting prices of raw material iron ore.

The most-active January rebar contract on the Shanghai Futures Exchange rose 0.6 percent to close at 4,863 yuan a tonne.

Firmer steel prices, buoyed by an active construction sector in China, encouraged Chinese mills to buy iron ore again this week after stepping back last week when global economic uncertainties weighed on equity and commodity markets.

More of China's leading steel mills have decided to raise prices of their main products for September bookings, following a similar move by top listed steelmaker Baoshan Iron & Steel Co Ltd last week on hopes of stronger demand next month.

"This week buyers have come back and there were a lot of inquiries, deals being done higher than last week," said a Shanghai-based iron ore trader.

BHP Billiton , the world's No. 3 iron ore miner, sold 63-percent grade Newman iron ore fines at $182.50 a tonne, cost and freight, at a tender late on Tuesday, up from $180.93 last week, traders said.

BHP also sold 58-percent grade Yandi fines at $159 a tonne, they said.

Separately, Indian 63.5/63 grade ore was sold to a Chinese steel mill at $186.50 a tonne this week, about a dollar higher from last week, said an iron ore trader in Singapore.

"This means end-user demand is there and they're ready to pay market prices or even slightly above market prices," said the Singapore-based trader, adding he is looking at the Indian grade to be offered at $188-$189 on Wednesday.

News that Rio Tinto , the world's second largest iron ore producer, has suspended operations at two mines in Australia following a fatality, should also support prices, traders said.

The two mines, Brockman 2 and Nammuldi, produce around 15 million tonnes of iron ore a year, about 6 percent of Rio's planned output of 240 million tonnes this year.

"This will be supportive of sentiment, but I don't think the disruption will be long, probably just a day or two," said another trader in Shanghai.

Increased buying in the physical market buoyed index-based reference prices which miners like Rio and BHP use in setting contract rates.

Iron ore with 62 percent iron content rose 30 cents to $176 a tonne on Tuesday, according to the Steel Index .IO62-CNI=SI.

A similar index by Platts IODBZ00-PLT edged up 50 cents to $178.50 and Metal Bulletin's own gauge .IO62-CNO=MB rose 49 cents to $176.78.

Prices of iron ore swaps extended recent gains, with nearly all contracts, from August 2011 to December 2013, cleared by the Singapore Exchange, rising, reflecting investor optimism spot prices can sustain their upward momentum.

"A lot depends on the macroeconomic environment. If the world collapses, China's steel prices should correct and this will have a negative effect on iron ore prices," said the Singapore trader.

"But if the world economy and stock markets remain stable, we expect a strong iron ore market to continue."

(sourced Reuters)