September 26, 2012 / 5:16 AM / 5 years ago

Shanghai rebar falls, pressure on iron ore as restocking stalls

* Iron ore may fall below $100 again amid uncertainty-SSY
    * Trading activity thins ahead of China holiday

    By Manolo Serapio Jr
    SINGAPORE, Sept 26 (Reuters) - China steel futures fell on
Wednesday for the first time in three sessions, putting more
pressure on spot iron ore prices that may fall below $100 per
tonne again this week as a slowdown dents steel demand in the
world's top consumer.
    Iron ore has struggled to sustain price gains since
rebounding from a three-year low of $86.70 this month, with the
outlook for Chinese steel demand staying blurry despite a recent
increase in spot steel and futures prices.
    The most-traded rebar contract for January delivery on the
Shanghai Futures Exchange fell nearly 1 percent to
3,514 yuan ($560) per tonne on Wednesday.
    Benchmark iron ore with 62 percent iron content
.IO62-CNI=SI was unchanged at $103.70 a tonne on Tuesday,
according to data provider Steel Index.
    Most Chinese steel mills have stocked up on iron ore ahead
of a week-long National Day holiday next week, limiting activity
in the physical market. Many traders were also heading to a
major industry conference in China's port city of Dalian.
    "Most of the mills have taken action in advance so I expect
prices to stabilise or even soften a bit for the rest of the
week," said a Shanghai-based trader.
    Uncertainty about the outlook for steel demand in China is
also likely to pressure prices, with the sentiment boost from
Beijing's approval of more than $150 billion in infrastructure
projects this month fading.   
    "It's going to be very volatile ultimately, my personal
feeling is that it will probably go below $100 this week," said
Jamie Pearce, head of iron ore brokering at SSY Futures, part of
the shipbrokering group Simpson Spence and Young.
    Iron ore fell to one-week lows this week despite firmer
steel prices as Chinese mills managed inventories of the raw
material without a clear outlook for steel demand and end-user
consumption remained sluggish overall.
    But some traders say iron ore prices are unlikely to go
below $90 per tonne again.
    "If the price goes below $100, domestic supply in China
would fall dramatically and this would increase imports which
would then support prices back up again," said a second iron ore
trader in Shanghai.
  Shanghai rebar futures and iron ore indexes at 0458 GMT
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3514    -33.00        -0.93
  PLATTS 62 PCT INDEX              105.5     +1.25        +1.20
  THE STEEL INDEX 62 PCT INDEX     103.7     +0.00        +0.00
  METAL BULLETIN INDEX            106.32     +0.12        +0.11
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
($1 = 6.3066 Chinese yuan)

 (Reporting by Manolo Serapio Jr.)
 (; +65 6870 3884; Reuters
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