* Iron ore at near 8-month low as China demand stalls * Shanghai rebar stays near record lows By Manolo Serapio Jr SINGAPORE, May 31 Iron ore prices are on course to end May with their steepest monthly fall since August, reflecting slower demand in top consumer China where steel futures are trading near nine-month lows. Shanghai rebar futures are also headed for their worst monthly performance since August, and traders are unsure if steel and iron ore prices have yet hit bottom. "We still have two cargoes that we are not able to sell as buyers are still waiting for prices to fall further, so we have no option but to wait until the market rebounds," said an iron ore trader in Shanghai. Benchmark 62-percent grade iron ore fell 1.2 percent to $111.60 a tonne on Thursday, its lowest since Oct. 8, 2012, according to data provider Steel Index. The price of iron ore is down almost 17 percent for the month. That is its steepest slide since losing nearly a quarter of its value in August, potentially cutting profit margins of top miners Vale and Rio Tinto whose biggest revenue earner is iron ore. This week already, iron ore has fallen 9.4 percent, the largest such drop since late August. Slower Chinese demand is coming at a time when miners are increasing output from a year ago, adding to pressure on prices. Iron ore loadings from Australia, the No. 1 exporting country, stood at 45.9 million tonnes in May, down 3 million tonnes from the previous month, but up 5 million tonnes from a year earlier, according to a trader who tracks the data. "This clearly shows that China's demand has reduced, but at the same time supply has significantly increased from Australia over the previous year," he said. Iron ore prices have tracked the weakness in Chinese steel prices as supply outpaces demand. The most actively traded rebar contract for October delivery on the Shanghai Futures Exchange hit a session low of 3,424 yuan ($560) a tonne on Friday, near Thursday's nine-month low of 3,420 yuan. For all of May, construction-used rebar is down 5.8 percent, its widest drop since August's 9 percent slide. Rebar's slump this week puts it close to its all-time low of 3,376 yuan reached on Sept. 6, around the same time that iron ore hit a three-year low of $86.70 when China's economic slowdown curbed steel demand. The next key China data to watch will be Saturday's official Purchasing Manager's Index, with economists expecting a decline to 50.1 in May from 50.6 in April. An initial private-sector PMI survey last week showed a contraction for the first time in seven months, fueling a sell-off in commodities and equities. Shanghai rebar futures and iron ore indexes at 0443 GMT Contract Last Change Pct Change SHFE REBAR OCT3 3427 -12.00 -0.35 THE STEEL INDEX 62 PCT INDEX 111.6 -1.30 -1.15 METAL BULLETIN INDEX 110.79 -6.22 -5.32 Rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.1309 Chinese yuan) (Additional reporting by Ruby Lian in Shanghai; Editing by Richard Pullin)
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