Iron ore futures in China
came off session highs on Thursday after a survey showed the
country's manufacturing activity shrank in April, further
evidence of a slowdown in the world's No. 2 economy.
Recent gains in Dalian iron ore futures had encouraged
higher bids for spot cargoes and drove the benchmark spot price
more than 4 percent higher to a three-week peak near $53 a tonne
on Wednesday.
The most traded September iron ore contract on the Dalian
Commodity Exchange hit 406 yuan in early trade, its
highest since March 31, but by 0321 GMT it was just 1.5 percent
higher on the day at 398.5 yuan ($64) a tonne.
China's factory activity contracted to hit a one-year low
last month, the HSBC/Markit purchasing managers' survey showed,
suggesting economic conditions were still deteriorating despite
increasingly aggressive policy easing by the central bank.
"Some speculators who bet on falling iron ore prices were
forced to cover their short positions on Dalian. That's why we
saw a rally," said an iron ore trader in Shanghai.
"As soon as mills saw prices recovering, those with very low
inventory had to come out and buy some cargoes. But I doubt
whether this price increase will last because the overall supply
of iron ore is still huge and the economic outlook is poor."
Iron ore for immediate delivery to China's Tianjin port
.IO62-CNI=SI jumped 4.1 percent to $52.90 a tonne on
Wednesday, a level last seen on March 30, according to The Steel
Index.
News on Wednesday that global miner BHP Billiton
was delaying an Australian port project that would have boosted
output by 20 million tonnes had helped improve sentiment in a
market where prices have fallen around 60 percent in a year
because of a global glut, traders said.
But a trader in Singapore said: "I don't think the long-term
outlook has changed. We still expect a lot of supply coming
through. Buying activity has been poor. Steel mills lack cash to
buy from stocks at China's ports."
Brazil's Vale, the world's top iron ore miner,
said it produced a record 74.5 million tonnes of the steelmaking
commodity in the first quarter.
Rebar and iron ore prices at 0321 GMT
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.1977 Chinese yuan)
source: http://in.reuters.com