Reuters reported that spot iron ore prices in top consumer China fell, reflecting limited interest among steel mills in restocking the raw material ahead of next week's public holiday given the uncertain outlook for steel demand.
Traders said that price offers for imported iron ore cargoes in China dropped between USD 2 and USD 4 a tonne, after the benchmark rate slid by more than 2% in line with weaker Chinese steel prices. Based on data from price provider Steel Index, iron ore with 62% iron content IO62-CNI=SI, the industry benchmark, dropped 2.5% to USD 106.40 a tonne, declining for a third session running.
A Shanghai based iron ore trader said that "The market has become soft again and traders have also slowed down amid lots of uncertainty about the outlook."
Iron ore has rebounded from a near three year low of USD 86.70 reached earlier this month, on hopes that China's approval of more than USD 150 billion worth of infrastructure projects would boost steel demand. But the recovery has been unconvincing so far, with prices facing resistance past USD 100, amid signs end user demand for steel remains weak despite a recent spike in steel prices.
The Chinese usually restock raw materials ahead of long public holidays, including next week's National Day break. But many mills may have replenished enough at this point. Mr Mark Pervan global head of commodity research at ANZ said that "Most of the restocking activity's already occurred, so you'd probably see Chinese physical traders dipping out of the market."
Investment bank Macquarie, citing data from industry consultancy Mysteel, said that stockpiles of iron ore among small Chinese steel mills showed a stabilization of levels over the past fortnight. Macquarie said that the inventory now sits at 17.3 days worth of consumption, rising slightly from 17 days as of September 7th 2012, although still much smaller than the 27 to 30 days over the past year.
Weaker steel demand and wild swings in iron ore prices had prompted Chinese producers to keep smaller inventories of iron ore this year.