VINACHEM

October 4, 2012 - Spot coking coal prices in Asia were largely steady October 4 in spite ofsigns of positivity returning to the Indian market.

Fundamentals appeared to be rather balanced, market sources said, with aspurt of deals in September clearing any immediate pressure on producers toshift cargoes. "I don't think producers have to move cargoes as much," anAustralian trader said. "They don't have to accept every bid anymore."

Record spot volumes were sold in September, miners and traders reported.

This was substantiated by Platts data, which showed a record high numberof spot transactions for premium hard coking coal, HCC and PCI, 76% of whichwere in China.

Tangshan billet prices, a closely watched indicator of steel demand in China, were unchanged from September 28 at Yuan 3,140/mt ex-stock ($499.50).

Separately, the purchasing managers index in China released by HSBC for September was 47.9, up marginally from 47.6 in August, the bank said September 29 —the 11th-consecutive month the index has been below 50—which indicates a contraction in manufacturing activity.

However, some market participants felt the weak data may prompt the government to adopt a more expansionary monetary policy after the 18th party congress starting from November 8.

A Hebei-based trader said other expansionary monetary measures, such as reducing cash reserve requirement for banks, could lend support in lifting steel consumption, in turn lending support for iron ore.

More immediately, some expected iron ore prices to firm once the Chinese return from the week-long holiday.

"Many Chinese mills are low on inventories and many need to stock up once they come back from their holiday next week," said a Shandong-based trader.

However, while most market participants were waiting on the sidelines for clearer market direction and not yet committing to spot cargoes, the outlook for the fourth quarter was more bullish.

"Most mills have stock only for the month of October, so immediately after the holidays, there should be a rush for them to buy for November," a Guangzhou-based trader said.

But a Taiwanese mill source said the current demand situation was "very unclear," so any true recovery to the iron ore market would only take place in November after the Chinese government's growth and development initiatives truly take effect.

"Traditionally, the fourth quarter has always been a boom period for steel and that will also extend to iron ore prices," the source said.

But, one Singapore-based trader said: "It's hard to say where demand will truly go. The weather will keep getting colder and this will result in poorer demand for steel and raw materials."

Separately, the Guangzhou-based trader received an invitation to bid September 29 for a prompt 80,000 mt cargo of 64% Fe Venezuelan Ferrominera Sinter Feed fines (SFS).

In Goa, there were still no iron ore exports, due to current export restrictions.

Sources in the area said both the state and central government still need to check stock specifications and documents for illegally mined material before deciding what material can be released for export.

"Additionally the pollution board still needs to carry out some checks," a miner in Goa said. "It's going to take two months to resolve these issues."