IRON AND STEEL

Iron ore swaps extend gains ahead of China's return

Iron ore forward swaps extended gains early Friday, reflecting hopes that spot prices will bounce back when China returns next week from its Lunar New Year break.

Author: By Manolo Serapio Jr (Reuters)
Posted: Friday , 27 Jan 2012

SINGAPORE (Reuters) -

Iron ore forward swaps extended gains, reflecting expectations spot prices will bounce back when top iron ore buyer China returns next week after the Lunar New Year holiday.

Prices of nearly all swap contracts cleared by the Singapore Exchange rose on Thursday, although the modest gains also suggested any expected rebound in spot rates may be limited with some Chinese importers probably holding off on buying fresh cargoes until early February.

"There's a view that Chinese mills need to restock after the holiday, but at the same time the big miners who have held off sales this week will release more tonnage next week so prices may stay rangebound," said an iron ore trader in Singapore.

The February swap contract gained 13 cents to $144.94 a tonne, March was up 56 cents at $144.31 and April rose 88 cents to $143.50.

Prices of nearby months remained at a premium to spot, "reflecting widespread anticipation of an improvement in spot ore prices once Chinese buyers return from the week-long break," iron ore reference price provider Steel Index said.

Iron ore with 62 percent iron content .IO62-CNI=SI was unchanged at $139.80 a tonne for a fourth day running on Thursday, according to Steel Index.

Miners are also anticipating a pickup in Chinese demand.

Two big vessels, each possibly carrying around 350,000 tonnes of iron ore, from top iron ore exporter Vale are heading for the Philippines next month as the Brazilian miner looks to use the Southeast Asian country as an alternative base to reach Chinese ports.

In Australia, miners are bracing themselves for another cyclone which has strengthened to a category two storm and was moving towards Australia's northwest coast on Friday, threatening the region's rich mining fields.

Tropical Cyclone Iggy is expected to bring strong winds and heavy rains along the Pilbara coasts, the Australian weather bureau said, an iron ore-rich region where Rio Tinto and BHP Billiton have big mining operations.

Tropical cyclone Heidi lashed the remote northwest earlier this month, shutting the major iron ore terminal at Port Hedland, although the supply disruption which came just as Chinese mills were winding down buying activity ahead of Lunar New Year, had a limited impact on prices.

(Editing by Miral Fahmy)

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