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Iron ore holds up even as Shanghai steel extends losses

Published 20/10/2015, 02:26 pm
© Reuters.  Iron ore holds up even as Shanghai steel extends losses

* Shanghai rebar near all-time low

* ANZ advises selling any short-term recovery in ore prices

By Manolo Serapio Jr

MANILA, Oct 20 (Reuters) - Iron ore futures in China and Singapore edged higher on Tuesday on expectations overproducing Chinese steel mills would support appetite for the raw material, while Shanghai steel languished near record lows on weak demand.

China's iron ore imports rose 16 percent from the previous month to 86.12 million tonnes in September, the highest this year, customs data showed last week.

The most-traded January iron ore contract on the Dalian Commodity Exchange DCIOcv1 was up 0.5 percent at 372 yuan ($58) a tonne by 0305 GMT. On the Singapore Exchange, the most-active November iron ore SZZFX5 climbed 1.2 percent to $50.10 a tonne.

Along with higher iron ore imports, China's steel exports surged to a record 11.25 million tonnes last month as producers shipped more overseas due to falling demand at home.

Swelling Chinese steel exports suggest steel mills are overproducing, ANZ analysts said.

"Strangely, this should keep imported volumes of iron ore high, particularly with higher cost Chinese supply being consolidated," they said in a note.

"But excess Chinese steel output means lower steel prices. And with steel mills running on paper-thin margins - lower steel prices ultimately means lower iron ore prices."

China's slowing economy - gross domestic product grew at its weakest clip since 2009 in the third quarter - has hit industrial demand and shrunk steel consumption.

ANZ said it took profit on a short-term trade on a NYMEX January iron ore swap TIOF6 , turning in a 5 percent return after closing out its position at $45.81, just a tad above its $45 target.

The investment bank said it would "continue to advise selling any short-term recovery in prices".

Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI slipped 0.2 percent to $52.50 a tonne on Monday, the lowest since July 28, according to The Steel Index.

The spot benchmark has fallen 26 percent this year and is headed for a third annual drop amid a global glut and a slowdown in China's steel industry that have forced miners to slash costs to survive.

January rebar on the Shanghai Futures Exchange SRBcv1 fell 0.8 percent to 1,807 yuan a tonne. It touched 1,800 yuan on Monday, the lowest for a most-traded contract since the exchange launched rebar futures in 2009.

State-owned Chinese steel trading firm Sinosteel said it would delay the payment of interest to its bondholders due on Tuesday after extending the date investors can start redeeming its bonds by a month. urn:newsml:reuters.com:*:nL3N12K0AK

Rebar and iron ore prices at 0305 GMT

Contract

Last

Change Pct Change SHFE REBAR JAN6

1807

-14.00

-0.77 DALIAN IRON ORE DCE DCIO JAN6

372

+2.00

+0.54 SGX IRON ORE FUTURES NOV

50.1

+0.60

+1.21 THE STEEL INDEX 62 PCT INDEX

52.5

-0.10

-0.19 METAL BULLETIN INDEX

53.3

-0.46

-0.86

Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.3624 Chinese yuan)

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