Tuesday, December 07,
Spot iron ore prices hovered near highs last seen in May on Tuesday, aided by tight supplies of high-grade material, although buyers exercised caution ahead of possibly more monetary tightening in China.
China’s central bank may raise interest rates this weekend to enshrine its shift to a “prudent” monetary policy in the face of rising inflation, the official China Securities Journal reported on Tuesday, without citing any source.
Higher interest rates may slow lending to the construction sector and dent demand for steel in China, the world’s biggest consumer and producer, and consequently its appetite for iron ore. China is also the world’s No.1 iron ore buyer.
On the predicted date, it announced an increase in banks’ required reserves, not interest rates.
Offers to sell Indian ore with 63.5 percent iron content remained at $171-$173 a tonne on Tuesday, cost and freight delivered to China
“Steel mills are now looking for cheaper materials and buying at small quantities, I believe demand remains strong but buyers are cautious given the high prices and are minimizing purchases” said a trader in Beijing.
The Steel Index 62 percent iron ore benchmark slipped 70 cents to $167.10 a tonne, C&F, at the close of trade on Monday, but still near the 6-1/2-month high of $167.80 where it stood in the previous four straight days.
The index, based on spot prices in China, is expected to slow its rally and retrace slightly over the next four weeks after hitting strong resistance at $169.60, said Reuters market analyst Wang Tao.
Prices for forward swaps built on recent gains, reflecting investor optimism spot prices will remain firm into early 2011.
The December contract cleared by the Singapore Exchange rose $1.50 to $169.62 a tonne and the January contract gained $3.94 to $169.94. The February contract jumped $3.25 to $167.50.
“Prices should remain on the plus side in 2011,” said an iron ore trader in Singapore.
“I don’t see any fundamental change in the supply situation, and if anything the Indian side will get a little tighter as new steel capacities come on stream there.”
Bad weather in parts of India and a continuing ban on iron ore exports from its southern Karnataka state had limited supplies from the world’s third-biggest exporter of the steelmaking ingredient.
Source: Reuters
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