Iron ore may test 2013 low as China steel demand in doubt

Mon May 13, 2013 9:42am IST

* Iron ore hit a near 5-month low of $128.10 in early May
    * Excess steel supply in China keeps pressure on prices

    By Manolo Serapio Jr
    SINGAPORE, May 13 (Reuters) - Spot iron ore prices may slip
to fresh lows for the year this week amid signs that top
importer China's appetite for the raw material is waning due to
slow demand growth for Chinese steel.
    Recent below-market forecast manufacturing data has fanned
concern that China's economy is experiencing a tepid recovery.
Data due out later on Monday, including industrial output and
retail sales, will provide more clues on the state of the
world's second biggest economy. 
    "Mills are hesitating to take (iron ore) cargo. There's an
oversupply of steel and soon it may force some mills to cut
production, which will pressure iron ore prices even more," said
an iron ore trader in Shanghai. 
    Iron ore with 62 percent iron content .IO62-CNI=SI, the
industry benchmark, hit a low of $128.10 a tonne in early May,
its weakest since Dec. 13, 2012, based on data from Steel Index.
    On Friday, it dropped half a percent to $129.60 a tonne.
    The price may slip further to $126-$127 this week, the
Shanghai trader said. "We get inquiries but buyers are looking
for quite low prices," he added.
    Growth in China's steel consumption -- which typically peaks
during the second quarter -- has been slow, leading to huge
stockpiles of steel products as steel mills kept producing at
record rates in the hope that demand would catch up.
    Stocks of five major steel products among Chinese steel
traders, including rebar and hot-rolled coil, stood at 18.4
million tonnes as of May 3, according to data compiled by Bank
of America-Merrill Lynch.
    That is down just over 2 million tonnes from a peak of 20.6
million tonnes in mid-March, according to the data. China's
daily crude steel output hit a record high of 2.129 million
tonnes from April 21 to 30, based on estimates by the China Iron
and Steel Association. 
    "We would like to see steel warehouse stocks back in the
16-17 million-tonne range for margins to lift to more
comfortable ranges," Standard Bank analyst Melinda Moore said in
a note.
    "However, with 25 percent steel industry overcapacity still
prevailing, this may be wishful thinking at best."
    
  Shanghai rebar futures and iron ore indexes at 0353 GMT
                                                                                                     
  Contract                          Last    Change   Pct Change
  SHFE REBAR OCT3                   3643    +27.00        +0.75
  THE STEEL INDEX 62 PCT INDEX     129.6     -0.60        -0.46
  METAL BULLETIN INDEX             130.9     +0.00        +0.00
                                                                                                     
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
          

 (Reporting by Manolo Serapio Jr.; Editing by Richard Pullin)
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Earnings Season

REUTERS SHOWCASE

Monsoon Revives

Monsoon Revives

Monsoon revival keeps rain above average   Full Article 

Tackling Food Prices

Tackling Food Prices

India to free up extra 10 million tonne wheat in open market  Full Article 

Just Not Enough

Just Not Enough

Amazon's smartphone fails to kindle a "Fire" among reviewers.  Full Article 

Struggling Economies

Struggling Economies

Asian economies to struggle on weak export demand - Reuters poll  Full Article 

Mining Roadblock

Mining Roadblock

Coal India's plans for 20 mines hit by land, environment delays  Full Article 

Power Jolt

Power Jolt

UAE's TAQA pulls out of India power plant deal with Jaiprakash  Full Article 

Factory Sector

Factory Sector

China July HSBC flash PMI at 18-month high of 52.0   Full Article 

Currency Reserves

Currency Reserves

Sri Lankan, Indian central banks agree scope for government debt buys.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage