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UPDATE 1-Chinese iron ore futures slip; demand weak
December 31, 2013 / 7:38 AM / 4 years ago

UPDATE 1-Chinese iron ore futures slip; demand weak

* Weak demand offsets supply disruptions in Australia,
Brazil
    * Demand growth seen muted in early 2014
    * Environmental controls could have bigger impact next year

 (Updates with closing prices)
    By David Stanway
    BEIJING, Dec 31 (Reuters) - Chinese iron ore futures inched
down on the last day of 2013 after two consecutive days of
gains, with concerns about supply disruptions in Australia and
Brazil outweighed by a seasonal decline in demand in the world's
biggest consuming country.
    Traders had been trying to get hold of supplies in the hope
that disruptions from a tropical cyclone in Australia and heavy
rains in Brazil will drive up prices in the coming week, but
overall demand remains in a lull as major steel-consuming
sectors like construction down tools for the winter.
    "There is going to be an 8-million tonne squeeze on iron ore
supply, but on the demand side it feels a bit muted at the
moment," said Graeme Train, an analyst with Macquarie Bank in
Shanghai. 
    "We are not seeing the mills aggressively scramble for
material and while we should be looking at a bit of an upside in
prices (as a result of the supply disruptions), it will not be a
runaway increase."
    The most-traded iron ore futures contract on the Dalian
Commodity Exchange ended Tuesday at 911 yuan ($150) per
tonne, edging down 2 yuan from the previous close.
    Rebar futures in Shanghai also fell, with the most-traded
contract down 0.89 percent, or 32 yuan, at 3,570 yuan
per tonne by the end of the day.        
    Major global indexes rose slightly on Monday, with the Steel
Index's price for ore with 62 percent iron content
.IO62-CNI=SI rising $0.2 to $134.2 per tonne.
    The new year is not expected to see a spectacular period of
growth for China's steel industry, with this year's output
growth rate of around 8 percent expected to halve in 2014.
    "Sales are still fine, in terms of absolute volumes, but the
growth rate is going to look less impressive and could even be
negative over the first few months of the year," said Train.
    Many in the industry are waiting to see any further impact
from Beijing's wide-ranging anti-pollution measures, which could
result in further closures, especially in the steel producing
heartland of Hebei province, already planning to cut output by
as much as 86 million tonnes by 2020.     
    Small private mills in Hebei are thought to be responsible
for much of the hazardous smog that drifts over the capital,
Beijing. The province's share of total output has declined over
the year, from 27.6 percent in January and February to as low as
18.8 percent in November.  
    China is hoping to use tougher environmental standards as
part of a wider effort to rein in overcapacity in the sector,
which it blames not only for depressing domestic steel prices
but also for inflating the price of imported iron ore.
    "The measures won't affect demand but will affect supply, so
it should be good for the steel companies that don't get shut
down and for high-grade iron ores as well, because if you
increase capacity utilisation that encourages people to buy more
high-grade ore," said Train.
  Contract                          Last    Change   Pct Change
  SHFE REBAR MAY4                   3570    -32.00        -0.89
  DALIAN IRON ORE MAY4               911     -2.00        -0.22
  THE STEEL INDEX 62 PCT INDEX     134.2     +0.20        +0.15
  METAL BULLETIN INDEX            133.33     +0.41        +0.31
  Dalian iron ore and Shanghai rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading
 day
 ($1 = 6.0618 Chinese yuan)

 (Reporting by David Stanway; Editing by Subhranshu Sahu)

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