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Iron Ore-Spot prices rise on China demand hopes
May 30, 2012 / 7:32 AM / 5 years ago

Iron Ore-Spot prices rise on China demand hopes

* Potential China stimulus unlikely to be as big as 2008
    * Mills replenishing ore stockpiles after steep price drop

    By Manolo Serapio Jr	
    SINGAPORE, May 30 (Reuters) - Spot iron ore prices in top
market China rose on Wednesday, propped up by expectations
Beijing will do what it needs to boost a slowing economy which
should buoy demand for steel and its key raw material.	
    A rapid fall in iron ore prices this month also drew some
buyers back into the market, with some Chinese steel mills
replenishing low stockpiles following a bounce in spot steel
prices.	
    Iron ore has dropped nearly 9 percent so far in May, far
more than the 4 percent decline in steel prices, as Chinese
buyers skipped cargoes due to weak steel demand.	
    Price offers for imported iron ore in China rose on
Wednesday for the first time since early April, with Australian
and Brazilian cargoes increasing as much as $2 per tonne, based
on data from industry consultancy Umetal.	
    "It looks like the steel market is anticipating measures
from the Chinese government that would increase demand, so some
traders are more confident about the future," a Shanghai-based
iron ore trader said.	
    "But I haven't seen a lot of deals so I'm not sure whether
the market has reached bottom 100 percent. I don't think all
mills are ready to pay at current prices yet."	
    Signs are growing that China is doing what is necessary to
boost the world's No. 2 economy that probably slowed further in
the second quarter after an already weak first three months. 	
    Influential academics said China needs to lift investment to
spur growth, but also cautioned against any aggressive fiscal
stimulus, dampening market hopes the government might unleash a
budget similar to the 4 trillion yuan ($630.12 billion) it spent
during the 2008-09 financial crisis. 	
    	
    UPSIDE CAPPED	
    Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI climbed 1.4 percent to $132.50 a tonne on
Tuesday, the highest since May 17, according to the Steel Index.	
    Higher steel prices backed the recovery in iron ore. 	
    The price of steel billet in China's key Tangshan area in
Hebei province rose 20 yuan to 3,530 yuan per tonne on Tuesday
and is likely to gain another 10-20 yuan on Wednesday based on
the higher offers, another Shanghai trader said.	
    "I have also heard a lot of people saying prices for iron
ore at ports stocks have improved by 10-20 yuan per tonne for
all grades," he said.	
    But analysts do not expect another strong rally in iron ore
prices for the rest of the year, with the spike to near $150 in
April possibly the peak.	
    "Iron ore prices have come under pressure as seasonal demand
improvement in China fades out, but prices can be sustained in a
$120-$140 range through 2013," Ian Roper, commodities strategist
at CLSA, told an industry conference in Singapore.	
    Roper said while slower demand growth from China would cap
any upside, prices should find a floor near $120 given the high
cost for some producers.	
    Top miner Vale has been briskly selling cargoes
in the spot market this month, with some traders estimating its
spot sales at around 3 million tonnes so far in May. 	
    Vale is selling another cargo of around 176,000 tonnes of
above 64-percent grade iron ore at a tender closing on
Wednesday, traders said.	
    	
  Shanghai rebar futures and iron ore indexes at 0704 GMT
                                                                                            
  Contract                          Last    Change   Pct Change
  SHFE REBAR OCT2                   4100    -15.00        -0.36
  PLATTS 62 PCT INDEX              134.5     +2.00        +1.51
  THE STEEL INDEX 62 PCT INDEX     132.5     +1.80        +1.38
  METAL BULLETIN INDEX            133.55     +1.31        +0.99
                                                                                            
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
    
($1 = 6.3480 Chinese yuan)	
	
 (Editing by Himani Sarkar)

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