China’s pledge to speed up spending on railway projects to aid a...

China’s pledge to speed up spending on railway projects to aid a slowing economy has fueled recent gains in steel prices in the world’s biggest consumer of the alloy along with a seasonal pickup in demand.

“Mills have more incentive now to sustain their production so they’re buying more raw material,” said a Shanghai-based iron ore trader.

…Some Chinese steel mills are looking for high-grade cargoes for which spot supply is relatively tight, the Shanghai trader said.

“But I’m still relatively cautious on whether the (benchmark) price can go beyond $120 because we’re still looking forward to huge supply later this year,” he said.

Morgan Stanley sees global seaborne iron ore supply exceeding demand by 79 million tonnes this year, and doubling to 158 million tonnes in 2015.

“Although current market conditions remain relatively balanced, supply growth will begin to outpace global demand growth as the year progresses,” Morgan Stanley said in an April 8 report.