October 19, 2010 / 3:14 AM / in 9 years

Iron Ore-Prices slip from 5-month high, buying slows

* Steel production cuts continuing in China

* Vale sees iron ore averaging $130-$160/tonne in 2010, 2011

* Four-week outlook on iron ore prices-[IDnSGE69H0F9] (Adds Vale comments, graphics, technicals)

By Manolo Serapio Jr.

SINGAPORE, Oct 19 (Reuters) - Iron ore prices dipped as Chinese buying eased after prices scaled near five-month highs last week, although tight supplies of the steelmaking raw material kept offers firm.

“There are fewer purchases because prices have moved up too fast in just a few days, so buyers are taking a break,” said an iron ore trader in Shenzhen.

Offers for Indian ore in China with 63-63.5 percent iron content stood at $157-$159, cost and freight on Tuesday, Chinese industry consultant Mysteel said, unchanged from Monday.

The Steel Index (TSI) 62 percent iron ore benchmark .IO62-CNI=SI slipped to $152.20 a tonne, cost and freight to China, at the end of trading on Monday, from $152.70 on Friday.

The index touched its highest in nearly five months on Thursday after an eight-session rally fed by demand from Chinese steel mills based in the key production hub of Hebei province resuming operations after state-set production curbs.

Those cuts are still continuing in other provinces like Henan and Shandong, which have recently ordered steel mills to halve output in the current quarter, traders and market sources said, as part of China’s campaign to meet its energy efficiency target.

“I think for the rest of the year, the policy to control production will stay, and that should limit demand for iron ore,” said the Shenzhen trader.

Roger Agnelli, chief executive of Brazil’s Vale VALE5.SA (VALE.N), the world’s top iron ore producer, said on Monday he expects iron ore prices to average between $130 and $160 this year and sees a similar range for 2011, supported by Chinese demand. [ID:nN18283831]

Technically, the TSI may hit as high as $169.60 a tonne over the next four weeks, a level last seen in May, said Reuters market analyst Wang Tao.

A further rise to $175 a tonne could set a “strong bull trend” that will see it surpass a two-year high of $184.80 set in April, said Tao, adding support is seen at $145. [TECH/C-IRN] <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a four-week technical outlook:


For a correlation between iron ore prices and Shanghai rebar futures: link.reuters.com/sur98p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Singapore Exchange-cleared forward swaps were also weak, with the November contract SGXIOc2 falling $3.30, or 2.2 percent, to $143.83 a tonne on Monday and the December contract SGXIOc3 down $3.61 to $142.08 a tonne.

Crude steel output in China, the world’s biggest producer, fell to about 48.54 million tonnes in September from 51.64 million in August, industry data showed last week. [ID:nTOE69D079]

Reflecting a hazy demand outlook, Chinese pricing leader Baoshan Iron & Steel Co Ltd (600019.SS) and Wuhan Iron & Steel 600005.SS have kept key steel product prices steady for November. (Editing by Michael Urquhart)

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