SINGAPORE, Oct 25: Iron ore edged up on Thursday as Chinese steel producers bought the raw material amid signs that demand is recovering in the world’s top steel market.
A 90,000-tonne cargo of Australian 58-percent grade iron ore for December delivery was sold at $111 per tonne on the GlobalOre trading platform on Thursday, up from $110.50 earlier this week, traders said.
Miners and traders have been able to sell cargoes at higher prices this week as Chinese mills restock in response to rising spot steel prices, which suggest demand is slowly bouncing back.
Benchmark iron ore with 62 percent iron content <.IO62-CNI=SI> rose 1 percent to $118.70 a tonne on Wednesday, the highest since July 24, according to data provider Steel Index.
‘Spot iron ore transactions for high grade cargoes continue to print at a premium with spot; with such ‘decent pays’ the iron ore majors have returned with more spot tenders this week,’ said Jamie Pearce, head of iron ore broking at SSY Futures in Singapore.
China data on Wednesday suggesting that the world’s No. 2 economy may be on the road to gradual recovery in the fourth quarter, and expectations of further restocking by Chinese mills, could see iron ore prices push through to $120-$125 over the next week, said Pearce.
The HSBC Flash Manufacturing Purchasing Managers Index for China came in at a three-month high of 49.1 for October and showed order books were the most robust since April, raising hopes the economy may rebound after seven straight quarters of slowdown.
On Thursday, China’s Ministry of Industry and Information Technology said factory output should grow faster in October-December, though the recovery remains clouded by uncertainty in export markets.
VALE PUTS GUINEA MINE ON HOLD
Top miner Vale is selling another 75,000 tonnes of 64.9-percent grade iron ore at a tender on Thursday, with the last done deal for a similar material at around $127 a tonne, traders said.
Vale sold 63.93-percent grade iron ore fines at $123.58 per tonne on Wednesday, up more than $5 from last week, said a Shanghai-based trader.
The Brazilian miner posted a 66 percent fall in third-quarter net profit after iron ore prices slumped to three-year lows in September, prompting it to delay major projects, including the $5 billion Simandou iron ore venture in the West African country of Guinea.
Commonwealth Bank of Australia said Chinese steel mills are lifting output to capitalise on a 200-300 yuan ($32-$48) per tonne increase in margins as demand and prices rise. A month ago, crude steel margins were close to break-even, the bank said in a note.
But traders say the continued rise in iron ore prices is making some mills hesitant in buying more, given China’s steel demand remains fragile.
‘Some mills have temporarily held up buying because prices have been rising too fast. When prices approach $120 (for the 62-percent grade) people start getting cautious again,’ the bank added.
‘We have not sold much this week. Prices for port stocks are also rising and deals are very limited,’ said another iron ore trader in Shanghai who has about 200,000 tonnes of unsold cargoes sitting at Chinese ports.
About a third of those were purchased in May when prices were nearly $30 more than current levels, he said.
(agencies)
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