July 20, 2012 / 5:40 AM / 8 years ago

Iron Ore-Spot at 8-1/2 month low, Shanghai rebar falls 2 pct

* Shanghai rebar at contract low, has worst week since Oct
    * Iron ore closing in on 2011 trough
    * Steel, iron ore may stretch losses on thin China demand

 (Updates rebar price)
    By Manolo Serapio Jr
    SINGAPORE, July 20 (Reuters) - Shanghai rebar futures hit a
contract low for the eighth time in nine sessions on Friday, and
posted their worst week since October as weak Chinese demand
kept pressure on prices, pulling down iron ore to 8-1/2 month
lows.
    Miners have curbed spot sales of iron ore amid thin appetite
from Chinese steel mills, the biggest buyers of the raw
material, and concern unloading more cargoes into the market
would fuel a further drop in prices, traders said.
    "It looks like the trend will continue next week. There is
very limited trading in the open market. Sentiment is quite weak
and no one is willing to buy," said a shipping manager for an
iron ore trading firm in Shanghai.
    Sellers cut price offers further for some iron ore cargoes
in China by $1 per tonne on Friday, after the benchmark
62-percent grade ore .IO62-CNI=SI fell for a seventh day in a
row on Thursday.
    Benchmark iron ore dropped 2.1 percent to $125.60 a tonne,
its lowest since Nov. 7, based on data from the Steel Index.
    Down more than 28 percent from a year ago, iron ore is now
closing in on its 2011 low of $116.90 reached on Oct. 28 when
sluggish Chinese steel demand led to production cuts. That was
its lowest price since December 2009.
    "Even if there's buying interest from some mills, they want
a very low price," said the Shanghai manager. Miner Rio Tinto
  sold a shipment of 59.7-percent grade South
African iron ore concentrate at $108 per tonne on Thursday,
which it initially offered at $120, he said.
    A slowing Chinese economy, which grew at its weakest pace in
three years in the second quarter, along with a seasonal lull in
demand during the summer months have pressured steel prices this
year.
    
    IRON ORE SURPLUS
    China's daily crude steel output had eased to 1.958 million
tonnes in the first 10 days of July, from a record level above 2
million tonnes in May, industry data showed this week.
 
    The most-active rebar contract for January delivery on the
Shanghai Futures Exchange closed down 2 percent at 3,782
yuan ($590) a tonne, after hitting a session trough of 3,747
yuan.
    For the week, rebar, which is used in construction,
lost more than 4 percent, its steepest since falling by over 8
percent in October.
    Slowing Chinese growth could create a global supply surplus
of iron ore in 2013, hurting mining giants that may also find
future demand for raw materials expanding more slowly than the
economy as Beijing reduces its dependency on infrastructure
spending. 
    Some Chinese traders with iron ore stockpiles at ports have
unloaded some cargoes at a loss, said an iron ore trader in
Shanghai, who added he had heard that Australian 61.5-percent
grade Pilbara iron ore fines were sold at 915 yuan a tonne, or
about $127 excluding other costs. 
    The last time Pilbara fines were sold at that level was
during the price slide in October, he said.
    "Other people who have cargoes in hand have just stopped
quoting prices, waiting to see what happens next week," said the
trader, adding his company has opted to hold on to 300,000
tonnes of stocks.
    
  Shanghai rebar futures and iron ore indexes at 0719 GMT
                                                                                          
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3750    -75.00        -1.96
  PLATTS 62 PCT INDEX             126.75     -1.75        -1.36
  THE STEEL INDEX 62 PCT INDEX     125.6     -2.70        -2.10
  METAL BULLETIN INDEX            127.42     -1.66        -1.29
                                                                                          
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.3734 Chinese yuan)

 (Editing by Himani Sarkar and Joseph Radford)
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