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Print[ferro-alloys.com] Spot iron ore prices rose to their highest level since late April and are set to stretch their gains to a third straight week, spurred by Chinese mills boosting stockpiles and traders betting on further price increases.
Firmer steel prices in China have supported appetite for raw material iron ore as traders replenished inventories after running them down as demand slowed for most of the first half of the year. Shanghai rebar futures are also headed for a third weekly gain after hitting two-month peaks on Wednesday.
Iron ore, China's top commodity import by volume and the biggest revenue earner for global miners Vale and Rio Tinto , has risen 4 percent for the week so far. For the month, it's up 13.2 percent, its biggest such gain since last December.
Rio Tinto sold a cargo of 61-percent grade Australian Pilbara iron ore fines at $133 a tonne on Thursday, up nearly $7 from a trade of a similar grade last week, traders said.
"Looking at the strength in steel and the shortage of supply from Australia, I'm not unduly surprised with the increase in iron ore prices," said an iron ore trader in Shanghai who trades Australian cargoes.
Recent heavy rains drenched parts of Australia'siron-ore rich Pilbara region and the Shanghai trader said it led to a huge backlog for China-bound supply.
"I see prices between $125-$135 for the rest of July and in August. I don't think the market can go beyond $135, there's no support from the steel market for that level," the trader said.
The most-traded rebar contract for January delivery on the Shanghai Futures Exchange was up half a percent at 3,691 yuan ($600) a tonne by the midday break. The contract hit a two-month high of 3,705 yuan on Wednesday, and is up nearly 1 percent for the week.
Some traders may also be restocking steel products ahead of the peak consumption season from September.
"Steel mills are making some profit at this juncture so I don't expect any production cuts. They will be producing for the best season for steel from September to mid-November and that should support demand for iron ore," said another trader in Shanghai.
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-day period, but still near the record pace of 2.193 million tonnes in May, industry data showed earlier this week.
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