Iron ore, Shanghai rebar eye worst month since Aug

Fri May 31, 2013 10:44am IST

* Iron ore at near 8-month low as China demand stalls
    * Shanghai rebar stays near record lows

    By Manolo Serapio Jr
    SINGAPORE, May 31 (Reuters) - 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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