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PrintSpot iron ore prices rose to their highest in almost three months, backed by expectations for Chinese mills to keep steel production high to keep up with firm demand.
Chinese steel prices have rebounded nearly 5 percent in July, as end-users restocked after prices fell 15 percent in the first half of the year along with slower economic activity.
Benchmark 62-percent grade iron ore .IO62-CNI=SI edged up 0.2 percent to $132.10 a tonne on Wednesday, its loftiest since April 30, data compiled by Steel Index show.
"There's no rush to buy cargo, but mills and traders are still looking. The reason they still want to buy is because order books for mills are already filled up to October so they need to maintain steel output," said an iron ore trader in Hong
Kong.
China's crude steel output stood at 2.083 million tonnes in the first 10 days of July, down 4.5 percent from the previous 10 days, but still near the record pace of 2.193 million in May, industry data showed last week.
"Mills on average are making about 50 yuan per tonne of margin, which is much better than losing 200 to 300 yuan about two to three months ago."
But having already risen a steep 13 percent this month, iron ore prices are unlikely to climb sharply further, the trader said.
On Thursday, the most-traded rebar contract for January delivery on the Shanghai Futures Exchange was nearly flat at 3,694 yuan ($600) a tonne by the midday break, but not far off the two-month high of 3,712 yuan reached last week.
July and August are typically lean months for steel consumption as construction activity in China slows in summer. But the rebound in steel prices has sparked hopes of a recovery for the sector.
Iron ore swaps <0#SGXIOS:> were also firmer, reflecting market expectations spot prices may sustain gains in the near term.
The August contract traded at $129 and $130 a tonne, said a Singapore-based dealer, after settling at $128.87 on Wednesday. September was trading at $126 versus the prior session's $125.94, he said.
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