UPDATE 1-Iron ore seen climbing back above $140 on firmer steel
* Shanghai rebar hits 1-1/2-week high, iron ore swaps firmer * China economy on better footing, boosts demand outlook * Iron ore to stay resilient at midpoint of $110-$143-Morgan Stanley (Adds Morgan Stanley outlook, updates rebar price) By Manolo Serapio Jr SINGAPORE, Aug 26 (Reuters) - Spot iron ore prices are expected to bounce back to near five-month highs above $140 a tonne this week, supported by likely brisk steel demand in top consumer China. Shanghai steel futures hit a 1-1/2-week high on Monday as signs of a stabilising Chinese economy strengthened hopes for steel consumption, which seasonally peaks in September and October along with construction activity. Benchmark 62-percent grade iron ore .IO62-CNI=SI rose 0.7 percent to $138.60 a tonne on Friday, according to data compiler Steel Index. The price of iron ore -- the biggest money spinner for top miners Vale and Rio Tinto -- has risen in seven of the past eight weeks as Chinese mills rebuilt stockpiles to keep pace with brisk steel production. Iron ore hit a high of $142.80 on Aug. 14, its loftiest since mid-March. "Demand from the mills is still quite healthy and iron ore prices could go back up above $140," said a Shanghai-based trader. "We are looking to buy because our stocks are very close to zero. In the short term, it seems difficult for prices to drop so it's good to have some stocks and sell them quickly." China's economy is showing clear signs of stabilisation, helped by policy support and some improvement in global demand, and is on track to meet the government's 2013 growth target of 7.5 percent, the state statistics bureau said. A pickup in China's manufacturing activity to the fastest pace in four months, based on data released last week, shows Beijing's efforts to boost the economy may be paying off. China has launched a series of measures to support the economy, including scrapping taxes for small firms, offering more help for ailing exporters and accelerating investment in urban infrastructure and railways. That is boosting the outlook for demand for commodities including steel and iron ore, with prices recovering from first-half declines when a slower Chinese economy curbed demand. PRICES RESILIENT "While we expect the iron ore price to drift lower from the current level, we think it will remain resilient in the mid-point of the current trading range of $110-$143," Morgan Stanley analysts said in a report on Monday. Prices may rise further beyond the third quarter if China implements economic stimulus measures in addition to major policy reforms, the report said. The most-traded rebar contract for January delivery on the Shanghai Futures Exchange hit a session high of 3,848 yuan ($630) a tonne, a level last seen on Aug. 14. It closed up 0.3 percent at 3,813 yuan. Iron ore swaps <0#SGXIOS:> were also firmer, reflecting expectations spot prices could scale higher. The September contract traded at $137.50 and $138 a tonne in early deals on Monday after settling at $137.06 on Friday, traders said. The October contract traded at $135, up from Friday's $134.25. Tighter credit access towards steel firms could pose a risk going forward as Beijing curbs lending to sectors where there is overcapacity, said the Shanghai trader. "The problem doesn't look that serious at the moment, but there's a potential risk which will affect steel demand," he said. China has around 300 million tonnes of surplus steel output capacity, equivalent to nearly twice the output of the European Union last year. Shanghai rebar futures and iron ore indexes at 0701 GMT Contract Last Change Pct Change SHFE REBAR JAN4 3813 +10.00 +0.26 THE STEEL INDEX 62 PCT INDEX 138.6 +0.90 +0.65 METAL BULLETIN INDEX 139.27 +0.53 +0.38 Rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.1210 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Richard Pullin)
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DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.
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