Iron ore prices edge up

Print this page Posted on : 09-03-2010 by recycleinme.com

Demand from China likely to pick up; Brazil makes big ore find

Reuters

Reuters

Singapore, Sept. 2

Iron ore spot prices ticked up, recovering some lost ground after recent losses, helped by data indicating demand from top buyer China will pick up.

China's manufacturing economy staged a modest rebound in August after slowing for several months, which suggests that the world's second-largest economy was moderating rather than melting down, say analysts.

“That data out of China suggests that manufacturing is picking up, and obviously that's positive for steel which has a follow-through (effect) to iron ore,” said Mr Danny Thompson, broker at Freight Investor Services.

“And whilst we haven't seen those steel product demand figures picking up just yet, I think the data that came out yesterday was an indication that could well be the case going forward and that's why there's a bit more positivity in the market.” Brazil, a major exporter of the steelmaking raw material, said on Wednesday that its iron ore exports rose 16.6 per cent in August from a month ago, boosted by strong Chinese demand. The figure was up 28 per cent from a year earlier.

The Steel Index 62 per cent iron ore benchmark edged up $0.30 to $141.80 a tonne on Wednesday. The index gained 3.8 per cent in August, after losing nearly 2 per cent in the previous month.

While the current price is still more than 23 per cent below two-year highs of above $180 touched in April, analysts say rising China demand and tighter supply due to lower Indian exports should allow iron ore to resume a bull run in 2011 after an expected decline in the last quarter of this year.

Iron ore spot prices have been hit by worries that steel output may have run ahead of demand. However, news of a big iron ore find in Brazil could check price gains.

Brazil's Mato Grosso state government said on Wednesday it had registered a major mineral deposit discovery with an estimated 11.5 billion tonnes of iron ore of a 41 per cent grade, bigger than the country's massive Carajas iron ore mine in Para state.

The physical market remained largely quiet although enquiries from China had been picking up.

Indian trading firm Steelmint concluded a deal this week for the sale of 50,000 tonnes Indian iron ore of 63.5 per cent grade to a Chinese steel mill at $150 a tonne, with freight, said Steelmint Managing Partner, Mr Dhruv Goel.

The last deal before that, about 8-10 days ago, was done at $157 a tonne, he said.

“Chinese steel mills are running in losses at this time. It's only because they have to run their plants that's why they procure iron ore but they're working on very thin margins,” said Mr Goel. Imported ore in China of Indian origin with 63.5 per cent iron content was offered at $150-$152 a tonne, with freight, on Thursday, steady from the previous day, Chinese industry consultant Mysteel said. Iron ore forward swaps bounced back after recent losses, with the October contract cleared by the Singapore Exchange rising $2.67 to $131.50 a tonne.

Further forward swaps rose much more with the December contract climbing $3.22 to $129.55 a tonne. Volume was a lean 64 lots, or 32,000 tonnes. Volume fell to 1.55 million tonnes in August from 1.89 million tonnes in July.

“The future is still unclear with regards to demand and what we're going to see throughout the rest of Q3 and into Q4, and I believe that's one of the reasons, along with northern hemisphere summer holidays, why the swap volumes have been a little bit low recently. People are waiting for clearer direction,” said Mr Thompson.

Source : Business Line