[ferro-alloys.com] Reuters reported that spot iron ore prices are expected to bounce back to near five month highs above USD 140 per tonne this week supported by likely brisk steel demand in top consumer China.

Shanghai steel futures hit a 1-1/2-week high on Monday as signs of a stabilizing Chinese economy strengthened hopes for steel consumption, which seasonally peaks in September and October along with construction activity.

According to data compiler Steel Index, Benchmark 62% grade iron ore .IO62-CNI=SI rose 0.7% to USD 138.60 a tonne on Friday. The price of iron ore the biggest money spinner for top miners Vale and Rio Tinto has rise in 7 of the past 8 weeks as Chinese mills rebuilt stockpiles to keep pace with brisk steel production. Iron ore hit a high of USD 142.80 on August 14, its loftiest since mid March.

A Shanghai based trader said that demand from the mills is still quite healthy and iron ore prices could go back up above USD 140. We are looking to buy because our stocks are very close to zero. In the short term, it seems difficult for prices to drop so it's good to have some stocks and sell them quickly.

The state statistics bureau said that China's economy is showing clear signs of stabilization helped by policy support and some improvement in global demand and is on track to meet the government's 2013 growth target of 7.5%.

A pickup in China's manufacturing activity to the fastest pace in four months, based on data released last week, shows Beijing's efforts to boost the economy may be paying off.

China has launched a series of measures to support the economy, including scrapping taxes for small firms, offering more help for ailing exporters and accelerating investment in urban infrastructure and railways.

That is boosting the outlook for demand for commodities including steel and iron ore, with prices recovering from H1 declines when a slower Chinese economy curbed demand. The most traded rebar contract for January delivery on the Shanghai Futures Exchange hit a session high of CNY 3,848 per tonne, a level last seen on August 14.

• [Editor:editor]