SINGAPORE: Spot prices of iron ore steadied on Friday, but may end the week with modest gains that could stretch to next week, when buyers resume purchases on expectations that Chinese steel mills will keep up strong production.
Price offers for imported iron ore cargoes in top consumer China were little changed, although quotes for Brazilian material rose by a dollar per tonne, according to Beijing-based consultancy Umetal.
Benchmark iron ore with 62 percent iron content was nearly flat at $115.50 a tonne on Thursday, based on data from Steel Index.
"Chinese mills are still looking to procure iron ore.
They are running low on inventory due to the massive destocking that took place in July-August and they need to have some cargo on hand," said a physical trader in Hong Kong.
While mindful of prices, traders say Chinese steel producers need to stock up on the raw material to sustain output that has remained strong in September, either backed by seasonal demand or hopes for demand to pick up gradually.
China's average daily crude steel output stood at 1.932 million tonnes last month, up 2 percent from August and not too far off record highs above 2 million tonnes earlier this year.
China is the world's largest steel consumer and producer and its legion of mills prefer to run production plants at or near full capacity even at razor-thin margins to keep their market share in a highly fragmented sector.
"While we will see some correction, I think iron ore has room to firm some more, $125 is likely," the trader said.
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