Iron ore at 2-week high on limited cargoes, rebar near 8 1/2 month top
Iron ore hit two-week highs as Chinese steelmakers bought spot cargoes with few shipments on offer, encouraged by steel prices that hovered at 8-1/2-month peaks on Thursday with hopes high demand will strengthen after next month's Lunar New Year break.
There have been limited cargoes offered in the spot market this week, forcing buyers seeking prompt shipments to purchase from stockpiles held at Chinese ports where prices have risen as inventories fell.
Iron ore at ports has been trading at a $4 per ton premium against fresh seaborne cargoes, said Jamie Pearce, head of broking at SSY Futures.
"There is still appetite from mills to take cargo, but I think they're not in a restocking phase that we have seen a lot recently. They have been living hand to mouth with port stocks," Pearce said.
"But with the port stocks trading at such a premium and not a flood of seaborne cargoes, probably for a larger size mill, it still makes sense for them to take (spot seaborne) cargoes."
Iron ore inventories at major Chinese ports have fallen to just above 69 million tons currently from a high of 96 million tons in early September last year, based on estimates by Australia and New Zealand Bank.
A 165,000-ton cargo of Australian 61-percent grade Pilbara iron ore fines was traded at $151 a ton on the trading platform run by China Beijing International Mining Exchange on Thursday, traders said.
That was the same price paid for the resale of a spot Pilbara fines cargo on Wednesday, but both were up $5 from early last week, a trader said.
Benchmark iron ore with 62 percent iron content <.IO62-CNI=SI> rose 0.7 percent to $149.40 a ton on Wednesday, after four days of barely moving, based on data from the Steel Index. That was the highest since Jan. 15.
Iron ore prices hit a 15-month peak of $158.50 on Jan. 8 but have since wobbled as a Chinese restocking spree that began in December waned. For the month, the raw material is up just 3 percent versus a 25 percent jump in December.
Miners from Australia and Brazil have offered fewer spot cargoes as unfavorable weather has disrupted shipments and traders said they could also be selling more through long-term contracts with mills.
Price offers for Australian and Brazilian iron ore cargoes along with other imported shipments in China rose up to $2 per ton on Thursday, according to Chinese consultancy Umetal.
"There's no trader willing to give any discount at the moment. They are either selling higher or waiting until after the Chinese New Year," said an iron ore trader in Shanghai.
For buyers, firmer steel prices in China are boosting confidence in purchasing iron ore at current prices.
The most active rebar contract for May delivery on the Shanghai Futures Exchange hit a session high of 4,130 yuan ($660) a ton, slightly below Wednesday's intraday peak of 4,131 yuan, which was the highest since May 2012.
Rebar closed up 0.4 percent at 4,127 yuan.
Some steel traders have been replenishing stockpiles hoping demand in China will pick up pace when construction and manufacturing activities ramp up after the Lunar New Year holiday.
The China Iron and Steel Association , which groups the country's biggest steel producers, expects an improved outlook for the sector this year, although that will be tempered by oversupply, high raw material costs and a likely slow pickup in consumption. (Reuters)