Monday, November 22,
Offers to sell iron ore edged up on Monday on supply concerns after a state in India, which is the world’s third largest exporter of the ore, kept a ban on shipments of the steelmaking raw material.
“The decision will keep the seaborne iron ore market tight and is likely to see spot prices supported over coming months,” Commonwealth Bank of Australia said in a note
“I’m not sure if the Karnataka ban will push prices further up but it will definitely keep them stable, they wouldn’t go down,” said a Shanghai trader, who said Chinese buying appetite was thin
Anticipating further price rises, iron ore forward swaps climbed on Friday, with the Singapore Exchange-cleared December contract gaining $1.30 to $160.50 a tonne and the January contract adding 55 cents to $157.45 a tonne.
China’s move to lift banks’ reserve requirement for the second time in two weeks which could cut lending to the construction sector and dent demand for steel, and consequently iron ore, may help offset any impact from tighter Indian supplies.
The People’s Bank of China, fighting inflation that is running at a two-year high, said the measure was intended “to strengthen liquidity management and appropriately control money and credit issuance”.
But the impact of Beijing’s latest tightening move may be temporary with Chinese demand expected to remain strong in the medium to long term, said James Wilson, analyst at Royal Bank of Scotland in Perth.
“China’s trying to cool the economy, not stop it. It’s probably going to have a short-term effect on iron ore, but the medium-term outlook for steelmakers is still very much positive,” said Wilson, citing the production expansion plans of major Chinese firms like Baosteel .
Investors had expected China to raise interest rates instead of banks’ reserve requirement and commodity prices seemed unshaken by the latest central bank action. The most active Shanghai rebar futures were up a modest 0.3 percent at 4,655 yuan a tonne by the midday break.
The Steel Index iron ore benchmark eased 40 cents to $162.80 a tonne on Friday
Source: Reuters
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