China steel, iron ore at 1-month top on demand rebound - Reuters

Wed Sep 19, 2012 3:52am EDT

  * Higher China steel prices behind recovery in iron ore      * Steel mills restocking ahead of China holiday      * BHP Billiton: Iron ore prices unlikely to repeat previous  highs     (Adds Bank of Japan, updates rebar price)      By Manolo Serapio Jr      SINGAPORE, Sept 19 (Reuters) - Shanghai rebar futures hit  one-month highs on Wednesday on signs of a pickup in steel  demand in top market China, prompting mills to restock iron ore  and supporting prices of the steelmaking ingredient that fell by  a quarter in August.      Iron ore prices rebounded from their lowest level in almost  three years earlier this month after Beijing's approval of more  than $150 billion in projects to build highways, ports and  airport runways boosted the outlook for steel demand.      The most briskly traded rebar contract for January delivery  on the Shanghai Futures Exchange closed up 1.6 percent  at the session's high of 3,638 yuan ($580) per tonne, its  loftiest since Aug. 17.      The Bank of Japan's move to boost its asset-purchase  program, following similar measures in the United States and  Europe, also boosted sentiment in rebar and other commodity  futures and equities.        Rebar, used in construction, has now gained more than 13  percent since hitting a record low on Sept. 6.      Spot steel prices in China are rising as well, with steel  billet in Tangshan in top steel producing Hebei province  advancing another 60 yuan on Tuesday to 3,180 yuan a tonne,  climbing more than 7 percent in just over a week.      Benchmark iron ore with 62 percent iron content  .IO62-CNI=SI rose 4.3 percent to $109.60 a tonne on Tuesday,  also the highest since Aug. 17, based on data from information  provider Steel Index.       "The rapid increase in steel and iron ore prices is  motivating traders to move into the market and take on cargo,"  said a Hong Kong-based iron ore trader.      "It's all about sentiment. Traders who earlier lost big time  will want to take the opportunity to ride the market."                  RESTOCKING           For a third straight day on Wednesday, price offers for  imported iron ore cargoes in China rose as sellers try to unload  cargoes at better prices after many suffered losses during a  market rout over the past two months.       Price offers for Australian, Brazilian and Indian cargoes  rose another $4-$5 a tonne, traders said.       Chinese mills are also replenishing iron ore inventory  before prices go even higher, ensuring they have enough stocks  ahead of the week-long National Day holiday in China next month,  said a trader in Shanghai.      "I heard some mills are back to buying cargoes on long-term  contracts because current spot prices are quite high," said the  Hong Kong trader.      Prices for long-term contracts are usually based on the  average of spot rates for the current month. Iron ore prices  have averaged about $95 so far this month, after falling to  $86.70 on Sept. 5, the lowest since October 2009.      But some traders are wary about the sustainability of the  upturn in steel prices.      "I haven't really seen any strong increase in real demand  for steel, so I'm not sure whether this rally in steel prices  will last," said another Shanghai trader.       BHP Billiton , the world's biggest miner,  said it does not expect a repeat of the "spectacular imbalance"  between steel supply and demand in China that propelled iron ore  prices to a record high above $190 last year.       BHP last month shelved its planned $20 billion copper and  gold mine Olympic Dam expansion in Australia and put all other  approvals on hold amid escalating development costs, slumping  prices and an uncertain outlook.          Shanghai rebar futures and iron ore indexes at 0738 GMT                                                                                            Contract                          Last    Change   Pct Change    SHFE REBAR JAN3                   3638    +56.00        +1.56    PLATTS 62 PCT INDEX                111     +4.50        +4.23    THE STEEL INDEX 62 PCT INDEX     109.6     +4.50        +4.28    METAL BULLETIN INDEX            110.17     +4.42        +4.18                                                                                            Rebar in yuan/tonne    Index in dollars/tonne, show close for the previous trading day   ($1 = 6.3189 Chinese yuan)     (Editing by Himani Sarkar)   (manolo.serapio@thomsonreuters.com; +65 6870 3884; Reuters  Messaging: manolo.serapio.reuters.com@reuters.net)  

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