Iron ore edged higher as traders snapped up spot cargoes, raising their bets on a market recovery that has proved elusive this year amid bountiful
supply.
The price of the steelmaking raw material is likely to steady in the second half of 2014 after a slump in the first six months on a flood of new supply to top buyer China, but further weakness is seen in 2015, a Reuters poll showed.
Australian spot iron ore cargoes traded higher on Wednesday, along with iron ore futures in China and Singapore.
Benchmark 62-percent grade iron ore for immediate delivery to China .IO62-CNI=SI rose 0.4 percent to $94.20 a tonne on Tuesday, after a two-day drop, according to data compiled by Steel Index. Iron ore has fallen 30 percent this year.
Higher prices for seaborne spot cargoes suggest the benchmark rate could sustain gains on Wednesday.
An 80,000-tone cargo of Australian 58-percent grade Yandi iron ore fines was sold on the globalORE platform at $78.50 a tonne, up by a dollar from Tuesday, traders said. Another
80,000-tonne shipment of 62-percent grade Australian fines traded at $95 per tonne, up from $93.50, they added.
Chinese steel mills, the biggest users of the raw material, were also buying iron ore to replenish stockpiles, but the majority of the deals were by traders, said an iron ore trader in Shanghai.
"Some traders who bought last week are trying to maintain prices at high levels so they can unload their other stocks," he said.
"Some mills are also buying but I don't think they're so desperate to buy cargo now when there's a lot of available supply."
Miner Rio Tinto is offering 100,000 tonnes of 61-percent grade Australian Pilbara iron ore fines and 70,000 tonnes of 62.7-percent lump at a tender on Wednesday, traders said.
Iron ore for September delivery on the Dalian Commodity Exchange was up nearly 2 percent at 709 yuan ($110) a tonne by midday. The August iron ore contract on the Singapore Exchange rose 1.1 percent to $95.96 per tonne.
Deutsche Bank is predicting a surplus of 55 million tonnes in global seaborne supply of iron ore this year, widening to 106million tonnes in 2015, as it sees a modest 3-percent growth in Chinese steel demand this year and next.
Despite an expansion in China's factory activity in June, hitting a six-month high, the Purchasing Managers' Index for the steel sector remained under 50 for a second straight month, or still in contraction.
The steel industry continues "to face oversupply risks,"UOB-Kay Hian Securities analyst Helen Lau said in a note."Going forward, small turnaround among steel mills in May due to low feedstock prices will lead to production expansion.That, coupled with the weak property market and tight liquidity for the steel industry, increases concern on oversupply," said Lau.
The most-traded rebar contract for October delivery on the Shanghai Futures Exchange was little changed at 3,075 yuan a tonne.
Source: Reuters