Iron Ore-Prices steady, China sees limited impact from cutbacks

Asian iron ore spot prices were little changed on Wednesday, with the Steel Index benchmark languishing at near seven-week lows as the demand outlook remained hazy. Upcoming public holidays in China, the biggest buyer of the steelmaking ingredient , also limited activity in both the physical and forward swaps markets. Chinese markets are shut on Sept. 22-24 for the Mid-Autumn Festival and on Oct. 1-7 for the National Day holiday. "The market is quiet ahead of the Chinese holidays, not much going on," said Destiny Guo, an iron ore physical and derivatives broker at London Dry Bulk in Hong Kong.
The Steel Index 62 percent iron ore benchmark .IO62-CNI=SI stood at $139.20 a tonne at the end of trade on Tuesday, nearly flat from Monday's $139.30 and the lowest since July 30. Indian ore with 63.5 percent iron content was quoted at $146 to $148 a tonne, including freight on a landed China basis, on Wednesday, unchanged from Tuesday, Chinese industry consultant Mysteel said. The offers were down from last week's, which ranged between $147 and $152. "Quotations keep falling and I don't hear any deals," said an iron ore trader in Hangzhou in southern China. "We're considering buying some cargo and stocking it in the ports and waiting for the price to recover. We think the price will recover when the restriction on electricity use is over," he said, adding that he is looking for an offer below $145 for 63.5 grade Indian ore.
China, the world's biggest steel producer and consumer, reiterated it will produce a record 620-630 million tonnes of crude steel this year, the same estimate it made in July, suggesting recent efforts to trim output would have a limited impact on production. "There is little chance that China's steel sector will see a significant change in demand in coming months," Luo Tiejun, deputy head of the raw materials branch of China's Ministry of Industry and Information Technology, told a conference in Shanghai.
China has either shut down or ordered steel mills, mainly in the steel production hub of Hebei province, to trim output by up to 70 percent as it rushes to meet a five-year energy efficiency target, due in 2010. Beijing's cutbacks had raised worries that demand for iron ore would slow during the usually peak September-October period. The prospect of tighter supplies in coming months has prompted Chinese steelmakers to raise prices, with industry leader Baoshan Iron & Steel saying on Tuesday it will raise prices of key steel products by up to 8 percent for October.
India, a major supplier to China, said its iron ore output and exports will fall by a quarter in the year to March because of a government crackdown on illegal mining and a continuing ban on exports by the southern Karnataka state.
India is the world's third-largest exporter of iron ore. On forward swaps, the October contract SGXIOc2 cleared by the Singapore Exchange dropped $1 to $130.50 a tonne on Tuesday, reflecting the weakness in the physical market. Traded volume for all 24 months was a lean 80 lots, or 40,000 tonnes.

Source: Reuters