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PrintSpot iron ore prices steadied near their lowest levels in about a month as supply of the steelmaking raw material outpaced demand from top buyer China in the spot market.
But Chinese appetite for iron ore may pick up as another price increase by leading steel producer Baoshan Iron and Steel reflects optimism about demand in the world's biggest steel consumer.
"There's plenty of supply from the major miners in the spot market. On the other hand, it seems mills who have bought some cargoes last month are not in a hurry to replenish stocks," said an iron ore trader in Shanghai.
Benchmark 62-percent grade iron ore slipped 10 cents to $135.10 a tonne on Wednesday, according to the latest available data from compiler Steel Index.
That is not far off the September low of $134.10, touched last week and which was the weakest since Aug. 7.
Iron ore shipments to China from top supplier Australia rose 9 percent to 22.3 million tonnes in August from July with miners on track to boost production this year to feed Chinese demand.
Rio Tinto is looking to lift output to 265 million tonnes from around 200 million tonnes in 2012, and is proceeding with expansion work in Australia to lift annual operating capacity to 290 million tonnes.
Ample supplies of iron ore may drag the benchmark price towards $130, but it is unlikely to slip below that level, said the Shanghai trader.
"Some Chinese buyers may return ahead of the long holiday next month but so far we haven't seen any signs of that yet," he said.
Chinese markets are shut from Oct. 1 to 7 for the National Day holiday. Before that they are also off on Sept. 19 and 20 for the Mid-Autumn Festival.
Baosteel's move on Wednesday to scrap a price discount on its key hot-rolled coil products and to hike prices of cold-rolled coils for October bookings, reflects its positive outlook on demand, which should support prices for both iron ore and steel ahead.
Baosteel had raised hot-rolled coil and cold-rolled coil prices for September.
"Mills' margins are still okay so they can keep steel production high. Steel demand is still there but so far we're not seeing it be that strong," said another Shanghai trader who estimates the average profit margins among Chinese mills at around 100 yuan ($16) per tonne.
September and October are usually brisk consumption months for steel in China as most construction projects resume after the summer lull.
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