Analysts Wary Iron Ore Price Rebound Will Last
Chinese steel mills may have snapped iron ore stocks last week, eventually rendering prices of the key steel-making ingredient to rise, but this may not mean the momentum will last longer as analysts remained wary the trend could only be seasonal.
For one, the shopping splurge happened after China concluded its Golden Week holiday, where stores and businesses are mandated to close shop for a seven-day break, which finished on Oct 5.
"The Chinese came back with a vengeance at the start of last week, energizing otherwise quiet market conditions and sending the iron-ore price higher," Robert Montefusco, a senior commodities broker, told The Wall Street Journal.
Data gathered from The Steel Index revealed prices for 63.5 per cent iron ore fines delivered to Qingdao jumped as much as 29 per cent to around $117 a metric tonne Monday.
On Friday, it hit $114.50 a dry metric tonne.
But with its economic growth expected to decelerate, it is hard to imagine that the world's largest producer and consumer of steel would sustain its iron ore shopping spree, not to mention match previous iron ore purchases.
"China remains the main story in town for iron ore, and it's obviously now on a lower growth path than the stimulus-driven 2010-to-2011 period," said Melinda Moore, Standard Bank's London head of iron-ore sales, trading and research.
UBS economist Wang Tao likewise said the upward bump in iron ore imports by China in September should not be taken as a defining and final suggestion that the country is on a momentous appetite again for the commodity.
"Import demand is (still) not strong," she said in MarketWatch.
Last week, the International Monetary Fund slashed its economic growth projections for China, from an earlier 8.0 per cent to 7.8 per cent this year. The country's 2011 and 2010 growth's registered at 9.2 per cent and 10.4 per cent, respectively. IMF sees China's growth could hit 8.2 per cent in 2013.
For itself, the Chinese government is targeting a 7.5 per cent growth for 2012.
In September, prices of iron ore reached a near-three-year low of $86.70 a ton.