Shanghai steel futures stayed near three-month highs on Thursday, tracking gains in other commodities spurred by news the International Monetary Fund is boosting resources to aid countries hit by the euro zone debt crisis. Asian equities rose to a two-month top and commodities from copper to grains also edged up after the IMF said it is seeking to more than double its war chest by raising $600 billion in new resources.
But the modest price gain in China steel futures, along with lean volumes, might not be enough to revive buying interest in raw material iron ore which has thinned sharply this week ahead of the Lunar New Year break. Chinese markets are shut for a week from January 23. The most-active May rebar contract on the Shanghai Futures Exchange hit a session peak of 4,319 yuan a tonne, just off Wednesday's three-month high of 4,321 yuan. It closed up 0.2 percent at 4,310 yuan. In the spot market, the price of steel billet in China's key Tangshan area rose 20-30 yuan a tonne this week, to about 3,740 yuan on Wednesday, a Shanghai trader said, suggesting some demand that might support a pick-up in iron ore prices after the holiday.
"We expect Chinese steel traders to gradually and cautiously restock their steel inventories after the Chinese New Year," said Judy Zhu, commodity analyst at Standard Chartered. That might encourage steel producers to buy iron ore, which fell to a two-week low on Wednesday. Iron ore with 62 percent iron content eased 0.2 percent to $139.90 a tonne, cost and freight delivered to China, according to Steel Index, the third straight day of decline.
"Many trading companies like us will be off starting tomorrow so I don't expect any deals," said an iron ore trader in the port city of Rizhao in China's eastern Shandong province. "But I expect prices to rebound after the holiday since the low-inventory mills will need to go back to the market." Offer prices for some imported iron ore in China dropped by a dollar per tonne on Thursday, with Australian 61.5-grade Pilbara fines at $138-$140 a tonne and Yandi fines at $126-$128, said Chinese consultancy Umetal. Indian 63.5/63-grade iron ore fines were quoted at $144-$147 a tonne, down $2, said Umetal. All prices include freight cost.