China: Spot iron ore-prices steady, bad weather disrupts supply from India

Monday, December 06,

Iron ore prices steadied at 6-1/2-month highs and offers remained firm on Monday, supported by tight supplies as bad weather in India slowed cargoes into top buyer China.

Offers to sell Indian ore with 63.5 percent iron content stayed at $171-$173 a tonne, cost and freight.

Rains in India’s eastern and western coast had made it difficult for exporters from key areas like Orissa and Goa to load cargo, traders said.

“There has been some disruption in movements because of bad weather,” said an iron ore trader in Singapore. “As a result of which supply is restricted and is causing prices to remain relatively firm.”

Bigger capesize vessels that carry around 100,000 tonnes have to wait up to 15 days, said an iron ore trader in Rizhao in China’s eastern Shandong province.

Apart from the weather disruption, shipments from India, the world’s third-largest iron ore exporter, had been already tight due to a ban on exports of the steelmaking raw material from the southern Karnataka state.

The Steel Index 62 percent iron ore benchmark stood at $167.80 a tonne, C&F, for a fourth straight day on Friday. It was the highest level for the index since May 13.

Prices for iron ore forward swaps rose on Friday, suggesting investors were anticipating the price strength to continue.

The December contract cleared by the Singapore Exchange rose $1.37 to $168.12 a tonne and the January contract jumped $3.50 to $166.00. The February contract climbed $3.13 to $164.25.

“Chinese demand is still there but people are cautious in accepting offers above $170 a tonne.”

The caution reflects worries among Chinese steelmakers on how much Beijing may have to tighten monetary policy to contain inflation that is running at a two-year high. Higher interest rates may slow lending to the construction sector and dent demand for steel.

But the head of Chinese think-tank National Economic Research Institute said China’s inflation is unlikely to reach the heady levels seen in 2006-2008 because the economy is not showing signs of overheating.