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UPDATE 1-Iron ore at 4-month peak, cold snap shuts Chinese mines
November 14, 2012 / 7:33 AM / 5 years ago

UPDATE 1-Iron ore at 4-month peak, cold snap shuts Chinese mines

* Iron ore buying may stall as construction slows in winter
    * China overcapacity persists despite fall in steel
    * BHP eyes to control costs as iron ore market cools

 (Adds BHP Billiton, updates rebar price)
    By Manolo Serapio Jr
    SINGAPORE, Nov 14 (Reuters) - Iron ore edged up to its
priciest since July with steelmakers in top consumer China
picking up imported cargoes to sustain production as some
domestic mines shut due to a cold snap, although the appetite
could soon wane, along with steel demand.
    Construction activity has slowed in northern China, which
has seen heavy snow, traders said, which should curb demand for
steel and eventually for the raw material iron ore.
    Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI gained 0.2 percent to $122.30 a tonne on Tuesday,
the highest level since July 24, based on data from price
provider the Steel Index.
    Iron ore has gained 2.5 percent so far this month, on course
to stretch its winning run into a third straight month. 
    A recovery in Chinese steel prices from September lows
boosted profit margins of producers, spurring demand for iron
ore and fuelling its recovery from three-year troughs below $87 
hit in early September.
    "I heard some steel mills haven't bought enough cargoes, so
we might see some more buying and most likely prices will be
maintained around current levels," said an iron ore trader based
in Shanghai.
    "But I'm afraid the purchases may slow down if the weather
gets colder."
    Looking to control its costs in a cooler market, BHP
Billiton  said it expects to expand its iron ore
capacity by nearly a fifth just by working its mines, rail lines
and port harder. 

    Curbs on domestic iron ore production since October had
helped boost Chinese demand for imports. Some of the mine
shutdowns were also prompted by Beijing's efforts to ensure
safety ahead of the opening of a party congress this month that
will usher in a once-in-a-decade leadership change, the trader
    Iron ore output slipped 3.3 percent from September to nearly
125 million tonnes last month, according to data released by the
National Bureau of Statistics on Tuesday. 
    China's average daily crude steel output similarly eased in
October, down 1.3 percent on the month to 1.906 million tonnes,
although the modest drop supports expectations that the world's
No. 2 economy is stabilising after a seven-quarter slowdown.
    "We think Chinese steel production will likely remain stable
or decline modestly in coming months as a result of firming
demand as the Chinese economy continues to strengthen,"
Chicago-based Steel Market Intelligence said in a note.
    "We believe exports will trend lower in tandem with
improving consumption."
    Inventories of five main steel products, including
hot-rolled coil and rebar, in 26 major markets in China fell 2.8
percent from the end of October to 12.08 million tonnes on Nov.
9, industry group China Iron and Steel Association (CISA) said.
    But despite falling inventories, a recent rally in steel
prices is facing headwinds as overcapacity will continue to eat
into profit margins of Chinese steel producers, CISA said.
    The most traded rebar contract for May delivery on the
Shanghai Futures Exchange closed little changed at
3,642 yuan ($580) a tonne.
  Shanghai rebar futures and iron ore indexes at 0701 GMT
  Contract                          Last    Change   Pct Change
  SHFE REBAR MAY3                   3642     -7.00        -0.19
  THE STEEL INDEX 62 PCT INDEX     122.3     +0.20        +0.16
  METAL BULLETIN INDEX            122.91     -0.66        -0.53
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1=6.2265 Chinese yuan)

 (Editing by Himani Sarkar)

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