Iron Ore-Key indexes hold at 2-month lows

Fri Jun 3, 2011 4:52am GMT

* Buying interest from Chinese mills remains thin
* Rio Tinto says to study pricing iron ore in yuan
By Manolo Serapio Jr

SINGAPORE, June 3 (Reuters) - Spot iron ore prices steadied on Friday, with key indexes holding at more than two-month lows, as expectations of more price falls kept Chinese buyers at bay.

Australia's 62-percent Newman iron ore fines were quoted at $174-$176 a tonne, including freight, on Friday, unchanged from Thursday, Chinese consultancy Umetal said.

Indian ore with 63.5/63 percent iron content was also steady at $175-$178.

"We don't see much buying interest from the steel mills. Many are still on a wait and see stance on where prices will settle for imported ore so the small and midsized mills tend to use more domestic ore," said a Shanghai-based trader.

Spot prices may be consolidating, Commonwealth Bank of Australia said in a note.

"Even as spot has declined in recent weeks, forward swaps have fallen less and in fact are now higher than the curve a week or two ago," the bank said in a note.

"This suggests that forward buying interesting is picking up and, if this is sustained, we'd expect declines in spot prices to ease in the next week or two."

Iron ore price indexes, which global miners use to set quarterly contract rates, were flat to slightly lower on Thursday, holding at levels last seen in late March.

Metal Bulletin's 62 percent benchmark .IO62-CNO=MB slipped 20 cents to $170.42 yuan a tonne, its lowest since March 30.

Similar indexes by Platts IODBZ00-PLT and The Steel Index .IO62-CNI=SI were steady at $171 and $168.80, respectively, also their lowest since late March.

In the swaps market <0#SGXIOS:>, prices for nearby contracts fell for a second day on Thursday after recent steep gains.

The June contract fell $1.75 to $168 a tonne, July dropped $2 to $166.63 and August slid $1.44 to $165.94.

The volume of iron ore swaps cleared on the Singapore Exchange reached a record 6,905 contracts, equivalent to 3.45 million tonnes, 56 percent more than the previous record set in April 2010.

Rio Tinto , the world's No. 2 iron ore miner, said on Friday it would study the possibility of switching iron ore price settlements to Chinese yuan.

"For us, it's a complex issue," Rio Tinto iron ore chief Sam Walsh told a business lunch, when asked whether there were any plans to switch to yuan for settling iron ore prices.

"It's certainly something we will be looking at and studying," he added. "We don't have any initial plans," he said, emphasising that having iron ore priced in U.S. dollars was an important hedge for the company. (Editing by Himani Sarkar, sourced Thomson Reuters)