Iron ore and steel futures in China rose on Monday as firmer spot steel prices spurred a rebound from a recent string of losses, although the recovery is seen fragile amid growing signs of weakness in the world's No. 2 economy.
The most-traded iron ore for delivery in January on the Dalian Commodity Exchange was up 1.4 percent at 597 yuan ($97) a tonne by midday after rising as high as 605 yuan
earlier.
The January rebar contract on the Shanghai Futures Exchange had climbed 1.7 percent to 2,819 yuan per tonne after earlier peaking at 2,832 yuan.
Gains were fueled by a rebound in prices of billet in China's key Tangshan area by 70 yuan to 2,450 yuan per tonne
over the weekend as some buyers replenished stockpiles, said a trader in Shanghai.
"I think the increase is temporary," said Cao Bo, analyst at Jinrui Futures in Shenzhen. "The latest economic data shows
downstream demand is still weak, from real estate to auto."
China's factory output grew at the weakest pace in nearly six years in August while growth in other key sectors also
cooled, according to government data released on Saturday, raising fears the economy may be at risk of a sharp slowdown
unless Beijing takes fresh stimulus measures.
Following firmer futures markets, some sellers of iron ore in China have increased their price offers, traders said. A
cargo of Australian Pilbara iron ore fines was offered at $85 a tonne on the platform run by Beijing Iron Ore Trading Center
Corp, up from a market deal done at $83.50 on Friday, although no bid was seen yet, said the Shanghai trader.
"I have doubts on how long this hike in prices can last," said the trader.
Benchmark 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI rose 10 cents to $82 a tonne on Friday,
its first gain of September, according to data compiled by Steel Index.
The price fell to $81.90 on Thursday, its lowest since September 2009. It lost 1.9 percent last week, stretching its
losing streak to a fifth straight week.
Iron ore, the top revenue earner for miners Vale and Rio Tinto , has fallen 39 percent this year, and Morgan Stanley sees the price falling further to $70.
"However the index is unlikely to remain at these levels and should head back towards $90/tonne by yearend," Morgan Stanley
said in a report on Monday.
The bank said it expects steel production in China and the rest of the world to pick up in the fourth quarter and that more
higher cost mines in China and elsewhere would shut. It estimates iron ore mine production cuts outside of China would
reach 60-65 million tonnes in 2015.
Source: Reuters
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