Iron Ore-Shanghai rebar rises 1.4 pct as commodities rebound

Fri May 13, 2011 8:51am GMT

* Rebar futures rise despite China reserve ratio hike
* Indian 63.5 pct ore quotes stay at $186-$188/T
* Limited activity in iron ore physical markets

By Manolo Serapio Jr

SINGAPORE, May 13 (Reuters) - Chinese rebar steel futures rose 1.4 percent on Friday as a weaker dollar helped commodities rebound after recent steep losses, while investors shrugged off further tightening measures by Beijing.

Investors took the latest bank reserve requirement hike by China, its eighth since October, in their stride, with Shanghai commodity prices rising sharply on hopes Beijing may be nearing the end of its monetary tightening campaign.

The most active October rebar contract on the Shanghai Futures Exchange closed up 68 yuan at 4,850 yuan per tonne, gaining 1 percent over the week.

A softer dollar also supported prices. The dollar index , which measures the greenback against a basket of currencies, dropped 0.46 percent by 0849 GMT.

Rising steel prices could boost appetite of Chinese steel mills for iron ore with spot prices of the steelmaking ingredient stuck in narrow ranges since last month on slow demand from top buyer China.

Traders said the physical iron ore markets remain hushed although tight supplies from India should keep prices at current levels.

"The physical market continues with very little activity. Prices are expected to remain firm in view of reduced supplies due to monsoon in west coast (India)," London Dry Bulk said in a note.

Indian ore with 63.5 percent iron content was quoted at $186-$188 a tonne, including freight, on Friday in China, unchanged from the previous day, said Chinese consultancy Umetal.

Shipments from India, the world's No. 3 iron ore supplier which sells most of its material in the spot market, are expected to slow during the monsoon season which starts around June and continues for around four months.

"The tightness in iron ore supply will last for a long period, maybe until next year, so the current high prices will last for a while," Jia Liangqun, vice president of Chinese industry consultancy Mysteel, told an industry conference in Shanghai.

China has been aggressively boosting domestic production of iron ore to cut reliance on imports but Jia said it would be difficult to cut imports by more than 50 percent before 2015 given strong steel output in China, the world's No. 1 producer.

"The supply glut will happen later than what we expect," he said.

Global seaborne iron ore supply has been increasing by 20-40 million tonnes annually in recent years, but expansion plans by global miners like Vale , Rio Tinto and BHP Billiton could boost annual supply by around 100 million tonnes from around 2013, analysts have said.

Shorter term, it might take a while before Chinese mills strongly build iron ore stockpiles, as inventories of imported iron ore at Chinese ports stood at nearly 83 million tonnes on Friday, near a record set in April.

Iron ore indexes, which track the Chinese spot market and are used by global miners to price supply contracts, slipped on Thursday.

Platts 62 percent iron ore benchmark IODBZ00-PLT dropped a dollar to $182 a tonne and Steel Index's similar gauge .IO62-CNI=SI eased 60 cents to $179.

Metal Bulletin's 62 percent index .IO62-CNO=MB shed 8 cents to $179.52. (Additional reporting by Ruby Lian in Shanghai; Editing by Himani Sarkar, sourced Thomson Reuters)