SINGAPORE, Nov 6: Spot iron ore scaled a two-month high as recent gains in Chinese steel prices encouraged producers to pick up cargoes of the raw material, setting it up to test the $140 per tonne level last seen in August.
Shanghai rebar futures slipped on Wednesday, but were still within striking distance of three-week highs reached in the previous session. Prices of the construction steel product have bounced 2 percent since hitting four-month lows last week.
‘Some Chinese mills are coming back to the market, especially those from the northern part, they need to stock up for winter,’ said an iron ore trader in China’s eastern Shandong province.
China’s domestic production of iron ore slows during cold weather, making mills more reliant on imports.
Ore with 62-percent iron content for immediate delivery to China’s Tianjin port rose 0.7 percent to $136.80 a tonne on Tuesday, the highest since Sept. 5, said data compiler Steel Index.
The price has traded below $140 since mid-August.
It was the fourth day of gains for iron ore, the top revenue earner for global miners Rio Tinto and Vale which has rebounded 24 percent from this year’s low of around $110 reached in May.
‘I think it’s possible we can hit $140 again although most traders are in wait-and-see mode on this weekend’s plenary meeting,’ said the Shandong trader.
The Nov. 9-12 meeting of China’s ruling Communist Party will be the third since the leadership change last November and they have usually been a springboard for economic reforms.
The most-traded rebar contract for May delivery on the Shanghai Futures Exchange hit a session high of 3,677 yuan ($600) a tonne, before slipping to 3,649 yuan. On Tuesday, rebar rose as high as 3,692 yuan.
At the Dalian Commodity Exchange, the most-active May iron ore eased 0.2 percent to 945 yuan a tonne.
Iron ore exports to China from Australia’s Port Hedland, which handles around a fifth of global volumes, reached a record high 25.2 million tonnes in October, justifying the massive expansion mode of miners.
Australian producers Rio Tinto, BHP Billiton and Fortescue Metals Group have committed to increase their annual capacity this year and next to capture more of the Chinese market.
Shares of Rio and BHP in Australia rose on Wednesday to their highest since February while Fortescue hit 18-month peaks.
‘Despite uncertainty over future prices, iron ore stocks are in a position to make hay while the sun shines with spot prices continuing to edge up while tonnages exported to China showed strong gains,’ Ric Spooner, chief market analyst at CMC Markets, said in a note.
Brazil’s Vale, the biggest iron ore miner, is likely to report a 98-percent jump in third quarter profit later on Wednesday because of higher iron ore prices and sales volumes.
(agencies)
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