Iron-Ore Swaps Little Changed as China Break Slows Trade
Iron-ore swaps were little changed as trading slowed on holidays in China, the biggest importer of the commodity used to make steel, according to SSY Futures Ltd., a unit of the world’s second-largest shipbroker.
Fourth-quarter contracts declined 0.2 percent to $107 a dry metric ton, according to George Bushnell, an iron-ore derivatives broker at SSY in Singapore. Chinese markets are closed this week for national holidays, curbing interest in the contracts, he said in an e-mail today.
The price of physical iron ore with 62 percent content at the port of Tianjin was unchanged at $104.20 a ton for a fourth session today, data from The Steel Index Ltd. showed. Trading in the swaps will more than triple this year as investors use the derivatives to bet on Chinese economic growth and steel demand, according to Freight Investor Services Ltd., the largest broker of the contracts.
“There’s nobody really chasing it in either direction,” SSY’s Bushnell said. “Potentially a bit more activity can be expected on swaps tomorrow, but in relative terms liquidity remains thin, as is to be expected with physical iron ore flat.”
The Chinese government has been “disappointingly inactive so far” and steel mills need to cut production, Daniel Brebner, an analyst at Deutsche Bank AG in London, said in an e-mailed report today. The Asian nation approved plans last month to build roads, subways, railroads, sewage-treatment plants, ports and warehouses, prompting speculation that steel demand would benefit.
Government intervention in 2013 may help lift iron-ore prices above $120 a ton, according to the report. The country’s steel production may top out at 750 million tons a year, about 10 percent above current levels, Deutsche Bank estimates.
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