UPDATE 1-Iron ore at 2-week low as China demand slips, swaps down - RTRS

REF : Thomsons Reuters
"20-Nov-2012 09:11



Miners offering 600,000 T at spot tenders on Tuesday

China Nov 1-10 daily steel output up 1.6 pct





(Updates rebar price)



By Manolo Serapio Jr



SINGAPORE, Nov 20 (Reuters) - Iron ore swaps dropped on Tuesday after spot prices hit two-week lows with demand from top buyer China losing steam after weeks of restocking, prompting miners to unload more cargoes onto the spot market before prices fall further.



Top miners Vale VALE5.SA, Rio Tinto RIO.AX RIO.L and BHP Billiton BHP.AX BLT.L are together offering around 600,000 tonnes of iron ore at spot tenders closing today, traders said, far more than usual volumes.



The December swap contract SGXIOSZ2 cleared by the Singapore Exchange edged down to $115.50 per tonne in early deals after falling more than a dollar to $115.72 on Monday, brokers said, reflecting market expectations spot prices will slip further.



Iron ore with 62 percent iron content IODBZ00-PLT fell 1.2 percent to $122.25 a tonne on Monday, its lowest since Nov. 6, according to data provider Platts.



Chinese steel mills had stocked up on iron ore over the past four weeks on hopes of positive policy signals from China's 18th party congress. The meeting, however, ended last week without any indications of economic stimulus, said a physical iron ore trader in Singapore.



"And all this time, steel consumption has remained fundamentally weak, so now that mills are well stocked with iron ore, there's no incentive to procure more spot cargoes," the trader said.



"I believe sentiment will start to weaken from this point onwards," he said, adding he expects the benchmark iron ore price to drop to $115 in the near term.







MEASURED RESTOCKING



Before prices fall further, miners are unloading cargoes in the spot market at separate tenders on Tuesday, which traders expect to be sold at less than previous deals.



Vale is offering 155,000 tonnes of 60.74-percent grade iron ore and another 90,000 tonnes of 63.63-percent grade material, traders said.



BHP Billiton is selling 100,000 tonnes of 63-percent Newman iron ore fines and 110,000 tonnes of 58-percent Yandi fines, while Rio Tinto's tender for 165,000 tonnes of 61-percent Pilbara fines is also closing today, traders said.



"I guess no one wants to miss the boat so everyone will try and sell a lot today," said Jamie Pearce, head of iron ore broking at SSY Futures.



Iron ore has rebounded from three-year lows below $87 in early September, but price gains have since been capped at just above $120, with any recovery in Chinese steel demand remaining fragile.



Shanghai rebar futures SRBcv1 closed up 0.2 percent at 3,552 yuan ($570) a tonne, after briefly hitting a fresh seven-week low of 3,539 yuan. It fell nearly 3 percent on Monday.



But after heavy destocking in recent months that had cut steel inventories at both traders and mills to 2-1/2-year lows, there is a potential for a restocking cycle in China's steel sector, Commonwealth Bank of Australia said in a note.



"Any restocking in the steel sector is likely to be measured, though, thanks to Chinese banks rationing credit in the steel and iron ore sector," the bank said.



China's average daily crude steel output rose 1.6 percent to 1.957 million tonnes for the first 10 days of November from the preceding period, industry data showed on Tuesday, as large mills lifted output on a recent rally in steel prices from September lows. (Full Story)







Shanghai rebar futures and iron ore indexes at 0704 GMT



Contract Last Change Pct Change




SHFE REBAR MAY3 3552 +8.00 +0.23



PLATTS 62 PCT INDEX 122.25 -1.50 -1.21



THE STEEL INDEX 62 PCT INDEX 122.8 +0.00 +0.00



METAL BULLETIN INDEX 121.8 -1.15 -0.94




Rebar in yuan/tonne



Index in dollars/tonne, show close for the previous trading day"







($1 = 6.2345 Chinese yuan)


(Editing by Miral Fahmy)


((manolo.serapio@thomsonreuters.com)(+65 6870 3884)(Reuters Messaging: manolo.serapio.reuters.com@reuters.net))