iron ore-key indexes fall

Close to major support, high chance at breaking...

Iron Ore-Key indexes fall, Chinese buying slackens

Fri Sep 9, 2011 5:16am GMT

* Reduced buying of iron ore pulls back key indexes

* Chinese steelmakers reluctant to buy more ore amid rapid price rise

* Gloomy Europe and U.S. economies weigh on commodities

* Shanghai rebar trades almost flat all week

By Ruby Lian and Jacqueline Wong (Reuters)

SHANGHAI, Sept 9 - Slower demand for iron ore by Chinese steelmakers marginally dragged down major global iron ore indexes, but solid fundamentals may cap falls as the country still expects to post annual record steel output.

Steel mills and iron ore traders in China, also the world's top steel producer and consumer, have become increasingly cautious about purchases amid the rapid rise of the key steelmaking ingredient price since mid-August.

"Iron ore prices have been rising to a relatively high point, with downward risk also mounting as the macro economy still remains uncertain," said an iron ore trader in Beijing.

Prices of Indian iron ore fines with 63/63.5 percent Fe grade stood at around $190 per tonne, including freight, on Friday, up 3 percent or $6 since mid-August.

Global major iron ore indexes, mainly tracking the spot Chinese market, fell on Thursday, indicating steel mills' reluctance in building up more stocks.

The Steel Index for 62-percent Fe grade .IO62-CNI=SI fell $1.1 to $179.9 per tonne.

The Platts Iron Ore Index for 62-percent grade IODBZ00-PLT fell 50 cents to $182.5 per tonne, and Metal Bulletin Iron Ore Index .IO62-CNO=MB eased 10 cents to $181.09 per tonne.

A few cargoes from Australian miners were traded at lower prices late this week, with a cargo for 63-pecent Fe fines sealed at $184 per tonne, down slightly from earlier this week, also helping to ease the upturn in spot prices, traders said.

"Several tenders were priced lower compared with the beginning of this week, pulling down the spot market, as steel mills are hesitant to buy more when offers hit $190 per tonne," said a second iron ore trader in Beijing.

However, global miners are upbeat about raw material prices as demand from China remains strong and there is no sign yet of any slowdown in the global iron ore market despite a growing crisis in Europe and a weak U.S. economy.

Iron ore exports from India, the world's third-biggest exporter, fell 21.86 percent to 25.29 million tonnes during April-July as a result of higher costs and slow efforts to resume shipments in the Karnataka state.

"The tightness in Indian iron ore supply will continue to support iron ore prices before the rainy season in its eastern region ends," the first trader added.

China's inflation eased slightly to 6.2 percent in August from July's three-year high, raising expectations that the central bank will hold off on further policy tightening amid worries about a global economic slowdown.

However, the global economic outlook remains a concern among market players and is weighing on the broad commodities market.

Shanghai's most active January rebar contract was almost flat on Friday, down 0.04 percent at 4,801 yuan ($752) per tonne from the previous close.

($1 = 6.384 Chinese Yuan)