SINGAPORE, Nov 15: Shanghai steel futures slipped on Friday and were set to post their biggest weekly loss since May amid tepid demand in top consumer China, spurring caution among mills buying raw material iron ore to build up winter stockpiles.
Benchmark spot iron ore prices have moved by less than a dollar this week, reflecting hesitation by Chinese buyers at a time of ample supplies.
The most traded rebar contract for May 2014 delivery on the Shanghai Futures Exchange was down 0.2 percent at 3,622 yuan ($595) a tonne by 0323 GMT, and has lost 1.5 percent this week. That is its steepest weekly decline since the last week of May, when it fell by almost 4 percent.
Iron ore, also for delivery in May, on the Dalian Commodity Exchange eased 0.2 percent to 938 yuan a tonne, down slightly for the second week in a row.
Some Chinese steel mills were buying spot iron ore cargoes as temperature continues to drop in the northern part of the country, but they are doing so cautiously.
‘They’re buying because they don’t have much inventory but they’re buying really carefully because the price of iron ore is still quite high and steel prices are low,’ said an iron ore trader in Hangzhou in China’s eastern Zhejiang province.
China, which buys about two-thirds of the more than 1 billion tonnes of iron ore sold globally, tends to rely more on imports during winter when cold weather curbs domestic output.
Iron ore with 62 percent iron content for immediate delivery in China’s Tianjin port <.IO62-CNI=SI> was up 0.4 percent at $136.60 a tonne on Thursday, according to data compiler Steel Index. For the week, the price has gained just 70 cents.
‘Spot ore iron has traded throughout the week without much direction and the neutral tone is expected to continue through November. China’s crude steel output is expected to trend seasonally lower this month, which will weigh on both iron ore and coking coal markets,’ Australia and New Zealand Banking Group said in a note.
China’s crude steel output slipped to 65.08 million tonnes in October from 66.28 million the previous month, preliminary statistics showed.
Despite the slow market, some miners were able to sell cargoes at higher prices this week. Rio Tinto sold a cargo of 61.4 percent grade Australian Pilbara iron ore fines at $137.50 a tonne at a tender on Thursday, up more than $2 from the sale of the same grade earlier in the week, traders said.
‘At tenders, there’s always a brave man who wants to take some risk. But we’re not sure if other buyers can follow,’ said a Shanghai-based trader.
(AGENCIES)
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