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Iron Ore May Advance Amid Seasonal Demand Increase, UBS Says

Iron ore prices may climb as a seasonal increase in demand outweighs concern about slowing global economic growth, according to UBS AG.

Prices may trade from $150 to $160 per metric ton in the next quarter, Sydney-based analyst Tom Price said today. Iron ore with 62 percent content delivered to the Chinese port of Tianjin fell 0.4 percent to $142.20 yesterday, its fifth consecutive decline, data from The Steel Index showed.

Imports by China, the world’s biggest buyer of the steel-making ingredient, fell 7.4 percent to 59.32 million tons in January from a month earlier because of the Lunar New Year holiday, said the General Administration of Customs. China increased imports by 11 percent last year to 686 million tons. Prices have gained 2.7 percent this year amid expectations of sustained demand from China.

“Despite all of this uncertainty and confusion, we’re right at the start of the seasonal lift of steel production rates, not just in China but globally,” Price said by phone. “Everything seems to be poised for a lift, there just needs to be a shift in confidence.”

China’s steel-product exports were little changed at 3.73 million tons last month compared with 3.72 million tons in December, according to customs data. Shipments rose 20 percent from 3.12 million tons of a year earlier, according to data compiled by Bloomberg.

Home Building

Chinese officials will increase support for construction of affordable housing and ensure that “loan demand from first-home families” is met, the People’s Bank of China said on its website Feb. 7. The central bank’s comment echoed a statement that Housing Minister Jiang Weixin made in December, when he said China would prioritize loans for first-home buyers and support reasonable property-purchase demand.

The country’s “housing investment remains on trend; construction activity in housing -- and hence consumption of steel -- has not fallen into stagnation,” Credit Suisse Group AG analysts including Ric Deverell said in a Feb. 9 report.

Crude-steel production gained 8.9 percent last year to a record 683.3 million tons, the National Bureau of Statistics said Jan. 17. Annual production gained 10 percent in 2010 and 13 percent in 2009, after climbing 2.3 percent in 2008, according to the China Iron and Steel Association.

Nippon Steel Corp., Japan’s biggest steelmaker, expects prices to stay low as global producers of the metal used in cars, ships and construction continue to compete for orders amid slowing demand. Japan, the second-largest producer after China, cut exports by 4 percent in the first 11 months of 2011, according to a presentation by Nippon Steel Jan. 27.

“The steel mills aren’t confident in actually delivering metal to the market,” Price said. “They’re all nervous at the moment and that’s what we’re seeing in the trade.”

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