Bloomberg News

Iron-Ore Swaps Surge on China Rail Spending as Data Show Growth

January 18, 2013

Iron-ore swaps gained the most in two weeks as China, the world’s largest importer of the commodity used to make steel, said it would build railroads and economic data showed the first acceleration in two years.

February contracts rose 2.9 percent to $143 a dry metric ton, up from $139 at the close yesterday, according to SSY Futures Ltd. That’s heading for the biggest gain since Jan. 3, based on data from SGX AsiaClear, the largest clearer of the derivatives.

China will spend 650 billion yuan ($105 billion) this year on railroad construction, more than last year’s 631 billion yuan, the official Xinhua News Agency reported yesterday. The world’s second-largest economy expanded 7.9 percent in the fourth quarter from a year earlier, the National Bureau of Statistics said in Beijing today, topping the 7.8 percent median estimate in a Bloomberg survey.

“Physical traders are getting more buying interest coming in,” Mark Richardson, head of SSY Futures, said by e-mail today, citing prices bid at $143 a ton. “That coupled with the positive macro data has helped traders to believe that this recent strength can continue as we approach Chinese New Year.”

Ore with 62 percent iron content at the Chinese port of Tianjin was unchanged at $145.40 a ton yesterday after dropping 8.3 percent in five sessions, according to The Steel Index Ltd. The global benchmark collapsed to a three-year low in September as China slowed for seven consecutive quarters. It since rebounded 68 percent.

Steel Output

China’s industrial output in December rose a stronger-than- expected 10.3 percent, and fixed-asset investment for the year gained 20.6 percent, data showed today. Steel output increased to 716.5 million tons in 2012, the National Bureau of Statistics said today. Production in December climbed 7.7 percent from a year earlier to 57.66 million tons, the bureau said.

China will import 770 million tons of iron ore in 2013, 3.6 percent more than last year, Li Xinchuang, president of the China Metallurgical Industry Planning & Research Institute, said at a conference sponsored by Bloomberg Industries in New York on Jan. 16. The country buys more of the ore than the rest of the world combined, according to figures from Clarkson Plc, the world’s largest shipbroker.

Daily crude-steel output rose 2.3 percent in the first 10 days of January to 1.944 million tons, Xinhua said yesterday, citing the China Iron & Steel Association. Futures for steel reinforcement bars used in construction rose 1.2 percent to 3,970 yuan on the Shanghai Futures Exchange.

“Miners have been willing to step back from the market and let bids come to them,” Richard Lee, an iron-ore and freight trader at Barclays Plc in London, said by e-mail. “The swaps overextended, and with some broadly in line-but-positive Chinese numbers, the spot and swaps are converging.”

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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