Seymour Pierce expects Chinese steel producers to keep replenishing their stockpiles as spot iron ore prices continue to edge higher. It comes after news that China's output neared record highs earlier this month.

The broker sees it as a restocking episode after recent lows as Chinese buyers are tempted back into the market. China's daily crude steel output was up two per cent to 1.999 million tonnes in the first ten days of June 2012. This is not far off the records seen back in May 2012 when the run rate hit 2.045 million tonnes.

Spot iron ore prices edged higher on the whole today, as it looks set for a ninth consecutive day of gains. The Platts 62% Index rose to USD 138.5 per tonne, while the Steel Index had it up nearly half a per cent at USD 136.6.

Mr Matthew McDonald analyst at Seymour Pierce said that "Of interest is that prices were up $2 per tonne overnight on offers for cargoes from Brazil, which we see lifting the iron ore benchmark price again."

They will have been buoyed by the news that Rio Tinto is injecting a further USD 3.7 billion into its iron ore business in Australia. The mining giant raised the stakes in the Pilbara region of Western Australia today with plans to expand production by as much as 25%, taking annual output to 353 million tonnes.

The company touted China as the main reason behind the expansion plans as it estimates steel production at the global superpower will grow from 700 million tonnes a year to around a billion tonnes annually.

Source - Proactive Investors

(www.steelguru.com)