Iron ore trade reached a fantastic $ 100 ton. Iron ore prices this is the first time in nine months. Value is the price China must make do with talking back iron ore producers to get the iron ore contract prices offered by producers of iron ore.

How much further prices can rise and how long gains can be maintained is a vital question for Chinese steel mills and their Australian iron ore suppliers, locked in a bitter fight over long-term contract pricing.

STEEL OUTLOOK TO SUPPORT

Traders and analysts in China say iron ore prices are being guided by strong demand from the steel industry. Chinese steel output hit a record 49.42 million tonnes in June, data from the National Statistics Bureau showed.

“The market is focusing on steel prices more than ore prices. Ore prices are up because demand was boosted by the steel mills, which are keeping production high to pursue profits,” said a Beijing-based trader.

On Thursday, ore of 63/63.5 percent iron content traded at $99-101 a tonne, including freight costs, Mysteel said in a client message. [ID:nSHA362690].

Traders see more upside.

“The prices are likely to reach $105 a tonne soon,” said a Shanghai-based iron ore trader. “Australian miners are tightening their spot supplies and are not expected to ease them until a long-term deal with Chinese mills is announced.”

Trade sources said China’s Baoshan Iron and Steel Co Ltd (600019.SS) (Baosteel) is expected to raise September prices for its major hot-rolled and cold-rolled steel products by about 5 to 6 percent versus August, its third consecutive monthly increase. [ID:nSHA360423].

INCREASING SUPPLIES COULD COOL PRICES

Others say the current surge in prices has been caused by short-term supply constraints, including the monsoon in India, a major supplier of spot iron ore to China.

“The fundamentals do not support these levels. We might see a correction when supply normalises and Chinese steel mills have built inventory levels,” said Gaurav Atha, managing partner at K.N. Ram & Co, a miner and exporter in east India.

“There has been considerable decrease to the tune of 25 to 30 percent in volumes (out of India) owing to rains and congestion.”

India’s June to September monsoon slows down movement of iron ore and shippers in western ports stop exporting fines as these absorb moisture.

Intermittent strikes in June and early July in the eastern port of Haldia slowed down cargo movements in eastern ports, and while Haldia is almost back to normal, Paradip port has a waiting period of up to 15 days, another trader said.

Pawan Burde, senior research analyst at India’s Angel Broking, said in a month iron ore could fall to $80-$82 as more suppliers rush to cash in on current prices.

High cost domestic Chinese mines, which had struggled to survive at the low prices prevailing earlier in the year, could also reopen.

Ben Westmore, an economist at National Australia Bank, said he expected to see some moderation given the lull in manufacturing in China over the summer and also because of their high stockpiles.

“Athough you could see some short-term easing of prices it’ll turn around once demand in the big economies comes back in Q4,” Westmore said.

source : Reuters

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