China''s iron ore spot market is likely to stay firm this week as domestic traders remain keen to raise offers to steel mills after prices accelerated last week.
Indian ore with 63.5 percent iron content was being offered at $175 to $177 a tonne on Monday, cost & freight delivered to China, unchanged from last Friday, Chinese consultancy Mysteel said.As a large number of steel mills in China, the world''s largest iron ore consumer, continue to favour domestic iron ore due to cheaper prices than imports, traders raised prices of materials already shipped to ports.
"I am asking for higher prices today as I am expecting the iron ore market will extend gains this week. But buying may slow down a little bit this week and pick up again next week as it takes time for steel mills to digest the hikes," said an iron ore trader in Beijing.
Two major iron ore indexes, The Steel Index (TSI) and Metal Bulletin Iron Ore Index (MBIOI), have moved in different directions over the past two sessions.
TSI 62 Fe benchmark rose to a seven-month high of $169.1 per tonne on Friday, the highest since May 13. The MBIOI 62 Fe benchmark fell for the second session to $167.26 per tonne on Friday, but also stayed at a seven-month high.
CONCERNS WEIGH
A growing number of Chinese steel mills are wary of making large bookings, preferring to keep low inventories instead of going on a buying spree ahead of the new year holidays as in past years.
"Large steel mills are holding ample inventories, possibly around 2 month''s worth of production, while many small steel mills don''t want to take risks by purchasing much due to rising prices and are maintaining low inventories," the first trader added.
Iron ore forward swaps cleared by the Singapore Exchange slowed the pace of falls on Friday, with the January contract SGXIOSF1 slipping 37 cents to $169.88 a tonne, February SGXIOSG1 staying unchanged at $168.75 a tonne and March SGXIOSH1 rising 24 cents to $167.38 a tonne."I really doubt whether iron ore price gains can be sustained for a long period as traders keep raising offers while buying from steel mills hasn''t matched this trend since last week," said an iron ore trader in eastern China.
"The majority of market participants are expecting prices to rise next year, but I don''t want to take the risk of buying many ships right now," he added.
Luo Tiejun, an official with the Ministry of Industry and Information Technology told a conference on the weekend that China''s crude steel output was expected to reach 630 million tonnes this year. That indicates that daily crude steel output would reach around 1.77 million tonnes in December.
Data from the China Iron & Steel Association showed that China''s daily crude steel output rose almost 2 percent to 1.667 million tonnes in the first 10 days of December from the last 10 days of November.