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Wednesday, January 11, 2012

Iron Ore-Spot at 7-week top, Australian miners suspend loading

Wed Jan 11, 2012
* Rio, Fortescue suspend loading ops ahead of cyclone
* China iron ore demand seen rising after Lunar holiday

SINGAPORE, Jan 11 (Reuters) - Spot iron ore prices rose to seven-week highs, spurred by Chinese steel mills building inventories ahead of the Lunar New Year break later this month and expectations prices may climb further after the holiday.News of supply disruption from top iron ore exporter Australia, where miners Rio Tinto and Fortescue Metals Group have suspended loading operations ahead of a cyclone bearing down on the west coast, should also support prices.

Iron ore with 62 percent iron content gained 1.6 percent to $142.30 a tonne on Tuesday, cost and freight delivered to China, its highest since Nov. 23, according to Steel Index .IO62-CNI=SI.
The Australian supply disruption may cause a "near-term tightness in supply", said Rory MacDonald, iron ore broker at Freight Investor Services. But given a lacklustre steel market in China, the world's biggest iron ore buyer, MacDonald saw limited impact on the supply-demand balance from the closure of some of the world's largest iron ore ports in Australia."Whether we see prices gain significantly because of this is another thing altogether, but I don't think it's necessarily going to drive us into another upward cycle that we wouldn't be entering into anyway post-Chinese New Year holiday.

"If it's fairly minimal, then they'll be back on track in 48 hours or so, but if it repeats then obviously we're talking about a different scenario, but we'll have to wait and see," he said.
Traders are relatively upbeat about China's iron ore demand after the week-long holiday that starts Jan. 23, with construction activity seen picking up and on expectations the government will loosen monetary policy to boost the economy. The construction sector accounts for around half of steel demand in China. Iron ore touched a 2011 peak of $191.90 a tonne in mid-February in a rally following last year's Chinese New Year.

"Even as Chinese mills wind down buying activity ahead of Chinese New Year, traders are increasingly taking positions with a view that demand will increase following the New Year holidays in February, and on an expectation that more Chinese policy loosening will be delivered in the next quarter or two,"
Commonwealth Bank of Australia said in a note.

Several cargoes of Australian iron ore fines were sold on Tuesday at levels slightly higher than previous deals, surpassing expectations of many participants, Steel Index said. Rio Tinto sold 61.4-percent grade Pilbara fines at around $141.50 a tonne, while BHP Billiton sold 61-grade MAC fines also at $141.50, traders said. BHP also sold 62.7-grade Newman iron ore fines at $145.50 a tonne, traders said.

Shanghai rebar futures and iron ore indexes at 0744 GMT
Contract Change Pct Change
SHANGHAI REBAR* 4224 9.00 0.21
PLATTS 62 PCT INDEX 143.5 0.50 0.34
THE STEEL INDEX 62 PCT INDEX 142.3 2.30 1.64
METAL BULLETIN INDEX 141.42 0.71 0.50

*In yuan/tonne
#Index in dollars/tonne, show close for the previous trading day.

(sourced Reuters)

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