Bloomberg News

Iron-Ore Swaps Rally to 15-Month High as China Seen Accelerating

February 04, 2013

Iron-ore swaps rallied to the highest in 15 months on speculation Chinese steel mills need to restock before the New Year’s holiday and data showed industry expanding in the world’s largest importer.

February contracts rose 2 percent to $156.50 a dry metric ton by 12:04 p.m. in London, according to GFI Group Inc. That’s the highest for the next month’s swap since October 2011, according to data from SGX AsiaClear, the largest clearer of the derivatives used to hedge prices and bet on Chinese growth.

China’s service industries grew at the fastest pace since August, the National Bureau of Statistics said yesterday. The country, which imports more iron ore than the rest of the world combined, celebrates a week-long holiday next week. Mills that still need cargoes beforehand are having to pay more because storms disrupted supplies last month, according to Kerry Deal, head of iron-ore and bulk derivatives at Jefferies Hong Kong Ltd.

“Steel demand could pick up after Chinese New Year, due to warming weather and also good macro data coming from China lately,” Deal said by e-mail today. “A few mills in China, particularly some of the smaller ones, still need to restock in advance of Chinese New Year, and are having to pay up.”

Ore with 62 percent iron content at the port of Tianjin rose 5.6 percent since Jan. 18 to $153.20 a ton, according to the Steel Index Ltd. The benchmark price rallied 77 percent from an almost three-year low reached Sept. 5.

Inventories at Chinese ports dropped 5.2 percent this year to 66.9 million tons, the lowest since January 2010, according to Beijing Antaike Information Development Co. December imports jumped to a record 70.9 million tons, 11 percent more than a year earlier, customs data show.

Rebound

The world’s second-largest economy is rebounding after seven quarters of slowing growth. The non-manufacturing Purchasing Managers’ Index climbed to 56.2 in January from 56.1 in December, the National Bureau of Statistics and China Federation of Logistics & Purchasing said in a statement yesterday. A reading above 50 indicates expansion.

Steel rebar for delivery in May rose as much 2.4 percent to 4,235 yuan ($679.48), the highest since at least May 17, on the Shanghai Futures Exchange.

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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