2nd wave in major up swing in commodity prices, page-5

From the SMH,

While other commodity prices have come under pressure, iron ore is holding near five-month highs at just below $US140 a tonne, supported by brisk steel production in top market China as mills brace for the peak consumption season.

China's daily crude steel output averaged 2.14 million tonnes in the first 10 days of August, up almost 3 per cent from the previous 10-day period, according to industry group China Iron and Steel Association.

That should support demand for iron ore as Chinese mills ensure they have enough of the raw material to keep pace with steel demand anticipated to strengthen during the seasonally brisk September and October period when most construction activity resumes due to better weather.

Indications of a stabilising Chinese economy and Beijing's commitment to boost investment in urban infrastructure and railways are also pushing steelmakers to keep output high.

"Most people had expected China's economy to continue to soften and that did not happen. Nor did it grow really fast, but it's not growing at the exceptionally low rate that people were expecting," says Joel Crane, vice-president of research at Morgan Stanley.

"The issue here is a demand surprise not a supply surprise. If anyone is surprised why the iron ore price is high, it's not because they got supply wrong, it's because they got demand wrong."