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PrintReuters reported that spot iron ore prices may struggle this week to build on recent gains with Chinese steel mills wary about aggressively replenishing stockpiles given a tepid pace in steel consumption.
Shanghai steel futures were steady and have only gained about half a percent this month after sliding more than 4% in September, reflecting headwinds in the top consumer.
China's exports unexpectedly dropped in September defying a recent slew of data that pointed to a stabilising Chinese economy. Other data showed China's annual consumer inflation hit a 7 month high, limiting the scope for the central bank to support the economy.
A Shanghai based trader said that "There's plenty of iron ore in the market and steel mills are quite cautious, they're not willing to pay higher prices because steel prices haven't picked up yet. I see more downward pressure than upward push for iron ore. The market could test USD 127 in the short term.
According to data compiler Steel Index, Benchmark 62% grade iron ore .IO62-CNI=SI was little changed at USD 133.10 per tonne on Friday. Still, that was the highest level for the steelmaking raw material since September 26.
The most traded rebar contract for January delivery on the Shanghai Futures Exchange was nearly flat at CNY 3,609 per tonne by the midday break.
Iron ore prices rose 1.3% last week as mills restocked after the Golden Week holiday in early October. That was the sharpest gain since the week ended August 16.
There was no shortage of offers on the spot market as miners steadily unloaded cargoes having boosted production. Global miner Rio Tinto is selling another cargo of South African iron ore concentrate at a tender closing later on Monday.
Rio, along with other Australian miners BHP Billiton and Fortescue Metals Group are in the midst of robust expansion work that is expected to be reflected in bigger third-quarter output and even higher production in the fourth quarter. That may have helped boost China's iron ore imports which hit a record high 74.58 million tonnes in September.
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