Iron Ore-Index near 5-month top, up for 8th straight session

Iron ore prices rose for an eight consecutive session on Friday to their highest in nearly five months, marking their longest winning streak since March on strong Chinese demand. Chinese steelmakers have resumed buying supplies as government-enforced curbs on production eased and mills stockpile iron ore ahead of winter. But the surge in iron ore prices coincides with falling steel rebar futures in Shanghai SRBc8, suggesting market players may soon put the brakes on the iron ore rally given the hazy outlook for steel demand, with China bent on taming its red-hot property market. "The recent rises in iron ore prices, we think, will be short lived," said Judy Zhu, commodity analyst at Standard Chartered Bank. "The price gains have been driven by Chinese mills' stockpiling, but I do not expect them to stockpile a huge amount of it when domestic steel demand remains so-so." Industry data showed crude steel output in China, the world's biggest producer, fell to about 48.54 million tonnes in September from 51.64 million tonnes in August after Beijing curbed production to meet a year-end energy efficiency target.

The Steel Index 62 percent iron ore benchmark .IO62-CNI=SI jumped $1.90 to $152.70 a tonne, cost and freight to China, at the end of trade on Thursday, its loftiest since May 20. It marked the eighth consecutive session of gains for the index, matching the length of a rally in early March which eventually led to its rise to a two-year high near $185 on April 23. Offers for imported ore in China with 63-63.5 percent iron content were steady at $157-$159 C&F on Friday, said Chinese industry consultant Mysteel, although most traders had heard bids and deals upwards of $160.
The TSI benchmark has risen 5 percent so far this week, and has bounced 30 percent from 6-1/2-month lows touched in July, thanks to a pickup in Chinese buying after weeks of a lull in demand. "We are holding off procurement for the moment until the dust settles as iron ore prices have risen too fast in too short a time," said an iron ore trader in Shanghai. "Some of our customers have begun to take a more cautious attitude and we are receiving fewer enquiries." Standard Chartered's Zhu said she expects the index's rise to be capped at $160 a tonne. Highlighting the uncertain demand outlook, Chinese industry leader Baoshan Iron & Steel Co Ltd and third-ranked Wuhan Iron & Steel  have kept their key steel product prices steady for November. Rising prices will likely see Vale, Rio Tinto and BHP Billiton, the world's three biggest iron ore producers, lifting contract prices for the first quarter of 2011 after cutting them by at least 10 percent in the current quarter. The iron ore forward swaps market eased, with prices for fourth-quarter contracts dropping, ending four sessions of gains. The Singapore Exchange-cleared October contract SGXIOc1 slipped 50 cents to $148 a tonne. The November contract SGXIOc2 fell $1.87 to $147.88 and December SGXIOc3 dropped more than $2 to $146.63.

Source: Reuters