Tue Mar 22, 2011 3:48am GMT
By Manolo Serapio Jr. and Ruby Lian
SINGAPORE/QINGDAO, March 22 (Reuters) - Chinese steel rebar futures steadied on Tuesday after drifting to four-month lows earlier in the session amid a murky demand outlook that weighed on spot iron ore prices and forward swaps.
China is the world's biggest steel producer and consumer and traders usually look to the direction in Chinese steel prices when deciding whether or not to buy iron ore, the key material in making steel.
The most traded rebar contract for October delivery on the Shanghai Futures Exchange was up a modest 0.3 percent at 4,669 yuan a tonne by the midday break, after falling to as low as 4,627 yuan earlier, its weakest since Nov. 17.
A number of Chinese iron ore traders have remained worried about steel prices and demand in the short term, and are thus reluctant to make forward bookings with suppliers.
Some of them are also facing difficulty securing bank loans to be able to build their raw material stockpiles after a series of moves by China to tighten liquidity, including another increase in cash reserve requirements for banks.
Traders are still trying to assess the impact of Japan's earthquake and tsunami disaster.
"It seems iron ore prices will not be able to pick up significantly right now as mills and traders still see no obvious signals in increasing iron ore buying given weak steel demand," said an iron ore trader in northern China.
The Steel Index's 62 percent iron ore benchmark .IO62-CNI=SI dropped 0.5 percent to $163.80 a tonne, including freight, on Monday, after two days of gains.
The index, based on spot transactions in China, had lost about 15 percent since hitting record highs in mid-February before regaining some ground last Thursday.
Prices of forward swaps <0#sgxios:> also retreated, with second-quarter prices down after recent gains.
Sam Walsh, Rio Tinto's Iron Ore division chief, told an industry conference in Perth that a softening of iron ore prices was due to liquidity tightening in China.(Editing by Ed Lane)
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China is the world's biggest steel producer and consumer and traders usually look to the direction in Chinese steel prices when deciding whether or not to buy iron ore, the key material in making steel.
The most traded rebar contract for October delivery on the Shanghai Futures Exchange was up a modest 0.3 percent at 4,669 yuan a tonne by the midday break, after falling to as low as 4,627 yuan earlier, its weakest since Nov. 17.
A number of Chinese iron ore traders have remained worried about steel prices and demand in the short term, and are thus reluctant to make forward bookings with suppliers.
Some of them are also facing difficulty securing bank loans to be able to build their raw material stockpiles after a series of moves by China to tighten liquidity, including another increase in cash reserve requirements for banks.
Traders are still trying to assess the impact of Japan's earthquake and tsunami disaster.
"It seems iron ore prices will not be able to pick up significantly right now as mills and traders still see no obvious signals in increasing iron ore buying given weak steel demand," said an iron ore trader in northern China.
The Steel Index's 62 percent iron ore benchmark .IO62-CNI=SI dropped 0.5 percent to $163.80 a tonne, including freight, on Monday, after two days of gains.
The index, based on spot transactions in China, had lost about 15 percent since hitting record highs in mid-February before regaining some ground last Thursday.
Prices of forward swaps <0#sgxios:> also retreated, with second-quarter prices down after recent gains.
Sam Walsh, Rio Tinto's Iron Ore division chief, told an industry conference in Perth that a softening of iron ore prices was due to liquidity tightening in China.(Editing by Ed Lane)
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