SHANGHAI: Spot iron ore prices inched up for the first time in eight weeks as several steel mills in the world's top buyer China began to rebuild inventories, but slower steel demand and high ore stocks at Chinese ports are expected to cap gains.
Global iron ore indexes, tracking spot deals in China, posted gains on Monday after shedding more than 30 percent since mid-September due to weakening steel demand in China, weighed down by tight credit and global economic turmoil.
"Today we have seen a slight shift in sentiment coming from Europe and a more positive outlook on the Shanghai rebar contract," said Roddy Mann, a London-based iron ore trader at Metalloyd.
"Steel prices have started to stabilise and as the destocking continues I expect iron ore prices to recover in the next few weeks as mills look to replenish stocks."
The most-active January rebar futures on the Shanghai Futures Exchange dipped 0.7 percent to 4,095 yuan ($644) per tonne by midday close on Tuesday, after rising for four days in a row.
"China's steel prices have improved slightly, and as long as there is a pause in iron ore price declines, buying will kicking off quickly," said an iron ore trader in eastern China's Shandong province.
Platts' index for 62 percent iron ore rose $2 to $118.75 per tonne on Monday, and The Steel Index for the same grade rose $1.5 to $118.40.
Metal Bulletin's Iron Ore Index for the same grade rose half a dollar to $118.53 per tonne.
REBOUND TEMPORARY
Some traders remained concerned about the high level of stocks at Chinese ports and a flood of shipments to the Chinese coast, and a growing number of Chinese steel mills are launching overhauls to cope with slower steel demand during the winter season, which may choke off iron ore buying.
"The overhauls in some Chinese regions are just the beginning, and we might see more production cuts in coming weeks given demand is more tepid in winter," said the Chinese trader.
"The rise in spot prices should be a technical rebound rather than an essential turnaround in demand."
Chinese steelmakers and traders are struggling with a tighter credit as they need to repay bank loans as the year-end approaches, while Beijing has no intention to ease its tightening policies in short term.
China's steel industry association said iron ore stockpiles at eight major ports had now reached as high as 98 million tonnes, with much of that bought at prices of around $165 per tonne.
Meanwhile, miners from Australia and Brazil have continued to deliver more cargoes to China, which would continue to weigh on spot prices.
Comments
Comments are closed for this article.