Spot iron ore prices were flat over the week with Chinese buyers still cautious about large purchases, but traders expect offers to rise as mills rebuild stockpiles ahead of the Indian monsoon season.
Persistent supply problems from India, the world''s third-biggest exporter, have supported spot prices, and traders are expecting prices to rise further after the Labour Day holiday when steel mills return to the market to replenish stocks.
"Physical iron ore market prices are climbing up due to the limited availability of high grade cargoes," London Dry Bulk said in a research note.
Quotations of Indian ore with 63.5 percent iron content were unchanged at around $187 per tonne, including freight, on Friday, traders said.
The Steel Index (TSI) said in its daily report that 63.5/63 percent Indian ore was traded at $190.25 a tonne, a level last seen in early April.
Chinese steel mills and traders are expecting to receive deliveries from India''s west cost ahead of the monsoon season, which is also shoring up market sentiment.
The most active rebar futures on the Shanghai Futures Exchange slipped to 4,857 yuan ($747) per tonne, after hitting a three-week high on Thursday.
The China Iron & Steel Association warned on Friday that the country''s steel output will remain in a glut.
The association said China''s mills could no longer rely on rapid increases in demand, which is expected to slow to 2.6-4.6 percent per year for 2011-2015.
China''s daily output of crude steel stood at 1.904 million tonnes over the April 11-20 period, down 1.5 percent from the previous 10 days. That would amount to 700 million tonnes on an annualised basis, up 11.6 percent on 2010, CISA data showed on Thursday.
INDEXES, SWAPS JUMP
Key iron ore indexes, tracking spot prices in China and used by global miners like Vale and Rio Tinto to make quarterly pricing, extended gains on Thursday, reaching a two-week high.
"We''re seeing increased volumes of lower grade ore traded as mills paying high Q2 contract prices seek to introduce lower cost ores to their blends," TSI said.
Buoyant sentiment in China''s domestic steel market is driving demand for seaborne iron ore, it added.
The Steel Index .IO62-CNI=SI jumped $2 to $181.5 a tonne.
Platts 62 percent iron ore index IODBZ00-PLT gained $1 to end at $183 a tonne and Metal Bulletin''s 62 percent gauge .IO62-CNO=MB rose 68 cents to $181.06 a tonne.Iron ore swaps cleared by the Singapore Exchange also jumped on Thursday with investors upbeat about demand as a result of the much-anticipated restocking after Labour Day.
April contract rose 70 cents to $179.26 a tonne, May surged $5.25 to $180 a tonne, and June also gained $4.94 to $174 a tonne.