Reuters- Spot iron ore prices were steady on Tuesday but were seen rising later this week as top buyer China restocks, allowing prices to rebound after losing around 6 percent last month.
Chinese steel mills began returning to the market last Friday, helping spot prices rise for the first time in about a month. But activity stalled with China shut for a public holiday on Monday.
"As far as the physical market goes, most people are expecting or talking about a spike in demand to come at the end of this week or early next," said Gareth Hudson, iron ore broker at London Dry Bulk.
"Chinese buyers are coming back to the market and I think that's where most of your bullish tone is coming from."Prices could rally around $10 from current levels of around $170 a tonne, but Chinese appetite could wane again when prices rise beyond $180 as it did in May, traders said.
The Steel Index's 62 percent iron ore benchmark .IO62-CNI=SI was steady at $170.20 a tonne on Monday and a similar gauge by Metal Bulletin .IO62-CNO=MB was unchanged at $170.30.
Platts 62 percent index IODBZ00-PLT was also flat at $171.75.
Offers for Australia's 62-percent Newman iron ore fines were unchanged at $174-$176 a tonne, including freight, on Tuesday, and Indian 63.5/63 percent fines were steady at $175-$178, Chinese consultancy Umetal said.
Physical market activity was expected to pick up later in the week.
"This morning I got queries from steel mills looking for reasonable cargoes. Most steel mills are really low on iron ore stocks and they really need to replenish," said a trader in China's eastern Shandong province.
Market players are eyeing the results of a tender by global miner BHP Billiton expected later on Tuesday for cues on where spot prices are headed.
BHP was selling 80,000 tonnes of 61.2 percent iron ore fines and 90,000 tonnes of 57.7 percent grade, traders said.
"The 61.2 percent should be sold at least around $170-$172. I don't think it will be below $170 because the market is recovering right now," said the Chinese trader.
A sharp jump in prices of forward swaps on Monday reflected investor optimism about a recovery in physical prices, although the swings were exaggerated by the thin volumes.
The Singapore Exchange-cleared June contract rose $5 to $173, July gained $4.05 to $171.17 and August climbed $3.75 to $170.
Volume traded dropped to 90 lots from 142 lots on Friday.
India's Karnataka state could start issuing iron ore shipment permits within 15 days, two months after an export ban was lifted. But traders said they did not expect overseas sales to pick up before September when the monsoon season traditionally ends.