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PrintSpot iron ore prices scaled two-month highs as firmer steel prices in top consumer China encouraged mills and traders to buy the raw material amid limited availability of spot cargoes.
Shanghar rebar futures rose for a second day in three on Wednesday and a Chinese steel producer sold billet higher than a week ago at a tender, suggesting solid demand for steel.
Benchmark 62-percent grade iron ore .IO62-CNI=SI climbed 1.7 percent to $129 a tonne on Tuesday, its highest since May 13, according to data compiler Steel Index.
"There's still demand, some mills are still replenishing stockpiles," said an iron ore trader in Hong Kong, adding that some market participants also expected higher steel prices.
"But some correction is due," he said.
Iron ore, China's top commodity import by volume, has gained almost 11 percent so far this month, recovering from a 20 percent decline in the first half of 2013.
Limited supply of immediately available cargoes from top producer Australia, where recent heavy rains drenched parts of its iron-ore rich Pilbara region, is also supporting prices, traders said.
Still, world No. 3 producer BHP Billiton said its output rose 9 percent to a record 187 million tonnes in the year to end-June and expansion of its iron ore operations in Australia was running ahead of schedule.
Miners such as BHP are keeping output high despite risks that Chinese demand may be curbed by a slowing economy.
China's average daily crude steel output fell to 2.083 million tonnes in the first 10 days of July from 2.181 million tonnes in the preceding 10-day period, industry data showed.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange hit a session high of 3,695 yuan ($600) a tonne, just off last week's top of 3,700 yuan which was a near two-month peak.
Firmer prices suggest steel demand may be picking up this month after prices fell 15 percent in the first half of 2013. But with the typically hot July and August slow months for the construction sector, steel consumption may not accelerate further.
Chinese steelmaker Yangang sold billet at 3,155 yuan a tonne at a tender on Wednesday, up 68 yuan from a week earlier, said a Shanghai-based trader.
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