Iron Ore-Shanghai rebar hits 1-month low on U.S. downgrade

Mon Aug 8, 2011 | By Reuters

* Shanghai rebar hits lowest since July 4
* Concerns over U.S. woes drag down rebar, iron ore swaps
* Iron ore traders still accessing impact of global rout

SHANGHAI, Aug 8 (Reuters) - Shanghai rebar futures fell over 1 percent to a more than one-month low on Monday as investors fretted about Standard & Poor's downgrade of the United State's top-tier credit rating, raising worries about a recession in the world's largest economy.

The most active January rebar futures contract on the Shanghai Futures Exchange traded down to 4,770 yuan ($741) on Monday, its lowest since July 4, and down 1.28 percent by the midday break from the previous close.

"Investors were frightened by the downgrade of the U.S. credit rating compounded by the euro zone's growing sovereign debt crisis, reversing the upward trend which was supported by high cost," said Jay Zhang, analyst with Everbright Futures.

Standard & Poor's cut the U.S. long-term rating by one notch from AAA on Friday on concerns about the nation's budget deficit and climbing debit burden, raising market concerns that the U.S. would slip into recession. Meanwhile, worries about the euro zone debt crisis continued spreading, further dampening global markets

A sharp fall in rebar prices has continued to weigh on prices of iron ore, the key steelmaking raw material, diluting buying interest among steel mills and traders in China, the world's top steel producer and iron ore buyer.

"The market has started to soften, but we are still evaluating the impact from the global rout later today," said an iron ore trader in coastal Shandong province.

Chinese steelmakers started to slow purchase of iron ore late last week after miners pushed up prices to as high as $190 per tonne including freight amid continued tightness of iron ore in India, the world's No. 3 exporter.

The Singapore Exchange-cleared iron ore swaps <0#SGXIOS:> extended losses last Friday due to a fragile outlook for the global economy.

Offers for Indian ore fines with 63.5 percent iron content stood steady at around $186-188, including freight, unchanged from last Friday, trading sources said.

Stockpiles of imported iron ore at major Chinese ports rose by 1 percent to reach a record 95.35 million tonnes by last Friday, with ore from top supplier Australia up 5.4 percent, while that from India slipped 1.2 percent and from Brazil down 5.7 percent.

India's Supreme Court partially lifted an iron ore mining ban imposed on July 29 in a key region of Karnataka state by allowing NMDC to mine up to 1 million tonnes per month of the steel-making ingredient from Aug. 6

Key global iron ore indexes, tracking spot deals in China and used by global miners to determine contract prices, were mixed last Friday, but still clung to their highest since mid-May.

Metal Bulletin Iron Ore Index .IO62-CNO=MB lost $1.12 to $177.45 a tonne, slightly off a nearly 2-month high on Thursday, and Platts 62-percent index IODBZ00-PLT fell $1.5 t0 $178 a tonne.

The Steel Index's 62-percent iron ore reference price .IO62-CNI=SI extended gains to $178 a tonne, up 10 cents from Thursday, its highest since May 17. ($1 = 6.440 Chinese Yuan)