Iron Ore Swaps, Shanghai Steel Gain on China Optimism

Nov 01, 2012 05:40 GMT   Source: Reuters

* PMI data points to Chinese economy regaining traction
* Shanghai rebar up 1.5 pct, iron ore steady near $120

SINGAPORE, Nov 1 (Reuters) - Shanghai steel rebar futures climbed more than 1 percent and iron ore swaps also edged higher on Thursday after data showed China's economy perking up, boding well for demand from the world's biggest steel and iron ore consumer.
   
China's manufacturing activity picked up in October, according to government and private sector factory surveys, with the official Purchasing Managers' Index back to expansionary territory at above 50.
   
The most active rebar for May delivery on the Shanghai Futures Exchange was up 1.5 percent at 3,687 yuan ($590) a tonne at midday.
   
First-quarter iron ore swaps traded at $115 a tonne in early deals, up from $113.50/$114 on Wednesday, said Jamie Pearce, head of iron ore broking at SSY Futures in Singapore, adding bids were better across the curve.
   
"The Chinese PMI number is giving a bit of positive sentiment to the market and seeing a bit of short-covering on rebar," said Pearce.  
   
Firmer Shanghai rebar prices and iron ore swaps may push up prices at tenders for iron ore cargoes in the spot market for the day and help lift the benchmark price, he said.
   
Top iron ore miner Vale is selling at a tender 175,000 tonnes of 65.61-percent grade iron ore due to pass Singapore on Nov. 28, traders said. Vale is also offering an 85,000-tonne 63.8-percent grade cargo arriving in Singapore on Nov. 30, they said.
   
Benchmark iron ore with 62 percent iron content .IO62-CNI=SI eased 0.4 percent to $119.30 per tonne on Wednesday, according to data provider Steel Index.
   
Still, iron ore has rebounded 38 percent from three-year lows below $87 in early September, helped by a modest recovery in China's steel demand and hopes that Beijing's once-in-a-decade leadership transition next week would pave the way for more pro-growth measures.
   
Pearce said most market participants were cautiously optimistic as demand remained steady among Chinese mills that are sustaining full-scale steel production.
   
China's average daily crude steel output hit nearly 2 million tonnes over the Oct. 11-20 period, up 4 percent from the prior 10-day period and matching a level last seen in early June, as rising prices encouraged steel mills to ramp up production.
   
Traders said smaller Chinese steel producers were opting to purchase iron ore from stockpiles at ports rather than fresh seaborne cargoes.
   
"Some mills who are not sure about the future of the market are buying port stocks so they can lock in profit margins for their steel products," said a trader in Shanghai, who has about 200,000 tonnes of iron ore at domestic ports.
       
  Shanghai rebar futures and iron ore indexes at 0421 GMT
                                                                                           
  Contract                          Last    Change   Pct Change
  SHFE REBAR MAY3                   3687    +53.00        +1.46
  PLATTS 62 PCT INDEX                121     +0.00        +0.00
  THE STEEL INDEX 62 PCT INDEX     119.3     -0.50        -0.42
  METAL BULLETIN INDEX            120.61     -0.19        -0.16
                                                                                           
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.2372 Chinese yuan)
 

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