25 Sep 2009 11:11

Spot iron ore prices in China to drop in October - industry analyst

By Ginger Ding

Shanghai. September 25. INTERFAX-CHINA - Although spot prices of Indian iron ore grading 63.5 percent at China's ports have recently risen, the rebound is expected to be short-lived and prices will falter in October, an industry analyst told Interfax on Sept. 25.

The CFR (cost and freight) price of iron ore grading 63.5 percent at China's ports returned to between $88 per ton and $90 per ton this week, according to the latest statistics from Mysteel Information.

"Domestic demand for iron ore is still steady at the moment, as the country's large-sized steel mills have not yet scaled back production in response to plummeting steel product prices, and have instead been rebuilding depleted iron ore stockpiles, especially before the forthcoming weeklong National Day holiday," Hu Kai, an industry analyst with Umetal, said.

Hu believes that domestic spot iron ore prices have limited room to rebound and will come down from the current level in October, as by that time, steel mills would have restocked their iron ore and the direction of the steel product market is still expected to be uncertain.

Currently, China's large-sized steel mills are turning a profit. However, if steel product prices slump further to below the production cost level of China's steel mills, production cuts will become necessary and iron ore demand would shrink further, Hu said.

Corrections to domestic steel product prices are continuing, with the average rebar price on the Shanghai market dropping by RMB 30 ($4.39) per ton from the previous trading day to between RMB 3,400 ($497.90) per ton and RMB 3,430 ($502.29) per ton on Sept. 25.

Imported iron ore stockpiles at China's ports have reached a high of more than 70 million tons.