Iron Ore-Spot prices up; global miners seen keeping Q4 prices steady

Thu Sep 1, 2011

* Global miners likely to keep prices steady for Q4
* Spot iron ore prices up $1
* Mills show growing buying interest
* Concerns over U.S. and Europe economy may weigh
By Ruby Lian and David Stanway

SHANGHAI, Sept 1 (Reuters) - Spot iron ore prices gained more ground on Thursday ahead of an anticipated rise in demand during the upcoming peak season, while indexes suggest global miners like Rio Tinto and Vale will keep prices almost steady in the fourth quarter.

Steel mills in China, the world's largest steel producer and consumer, expect seasonal steel demand to pick up in September and October, with spot prices gaining $1 on Thursday.

"They seem now to be restocking, there is interest and buying, and the industry is on the up again," said a Hong Kong-based commodities broker.

Australian 62 percent Newman fines rose $1 to $183-$185 a tonne, including freight, and Indian 63.5/63 fines climbed to $187-$190, from $187-189, according to Chinese consultancy Umetal

China's biggest listed steelmaker Baoshan Iron & Steel , also known as Baosteel, expected iron ore prices to remain at relatively high levels in the fourth quarter and next year, but said it also anticipated significant growth in net profits next year as demand strengthens.

Rio Tinto also said on Wednesday that the world will need at least 100 million tonnes of additional iron ore supply each year over the next eight years. It said its Simandou iron ore joint venture with China's Chinalco in Guinea was on track to make its first shipment by mid-2015.

However, steel mills and traders remain cautious about buying, amid worries about the U.S. and European economies.

"There are still concerns about double-dip recessions in Europe and the United States," said the broker.

"Right now there is buying sentiment in China, but with recent changes (in banks' required reserve ratio base) it may lead to cash restrictions and may limit iron ore buying."

The most active January rebar futures on the Shanghai Futures Exchange closed the morning session 0.08 percent lower at 4,827 yuan ($757) per tonne on Thursday. It hit a one-week high at 4,842 yuan per tonne earlier.

Q4 PRICING ALMOST FLAT

Global miners will likely keep iron ore contract prices mostly steady in the fourth quarter, with spot prices stabilising on firm Chinese demand and tight supplies, Reuters calculations showed.

Based on Platts index prices IODBZ00-PLT for June to August, which top iron ore miners such as Vale and Rio Tinto use to set fourth-quarter contract prices, the 62-percent grade averaged $175.63 a tonne, cost and freight, down marginally from $176.96 in March-May, on which third-quarter pricing was based.

Platts competes with the other two major global indexes the Steel Index .IO62-CNI=SI and Metal Bulletin Iron Ore Index .IO62-CNO=MB.

Prices for quarterly contracts are largely based on the average index prices over a three-month period ending a month before the start of each quarter.

Vale, the world's largest iron ore miner, would set 66-percent-Fe Carajas fines prices at $200.16 per dry metric tonne, delivered to Qingdao, one of China's major ports, for the December quarter, given that its customers have agreed not to adjust prices if quarterly changes are below 5 percent, Platts' said in its daily note.

"Those that do not have such a clause in contracts will see prices fall for the second straight quarter in Q4," Platts said.

Rio Tinto, the world's second-biggest iron ore miner, could lower prices by 1.2 percent for the October-December period, with iron ore fines likely to fall to $2.6896 per dry metric tonne unit FOB, from $2.7234 for the September quarter, also marking the second straight quarterly decline, the Platts' report said.

Metal Bulletin index rose 21 cents to $179.49 a tonne on Wednesday, and the Steel Index also gained $1 to $179.9 a tonne, the highest level since May 6. ($1 = 6.378 yuan)