Prices for spot Indian iron ore cargoes rose on Tuesday, reflecting tight supplies and expectations that higher Chinese steel prices will support demand for the raw material.
Iron ore shipments from No. 3 exporter India have been disrupted by the monsoon and a slow resumption of exports in southern Karnataka state, source of a quarter of the country''s iron ore shipments, after a ban on exports was lifted in April.
Indian fines with 63.5/63 percent iron content was sold to a Chinese trader at $188 a tonne, including freight, said a shipping manager for an iron ore trading firm in Shanghai.
That was about $2 more than a deal for the same Indian grade last week, traders said.
"Buying interest is there but people are now cautious with iron ore prices continuing to rise. Chinese steel prices are rising and I think that''s the main reason," said a dealer in Singapore.
"It''s mostly traders pushing iron ore prices higher. There is interest from end users but the interest is for cargoes at below $185 levels."
The most-traded January rebar contract on the Shanghai Futures Exchange ended down 0.1 percent at 4,945 yuan, after hitting a three-month high of 4,968 yuan on Monday.
China''s drive to build 10 million cheap housing units this year has been largely behind a boom in its construction sector.
The world''s biggest steel producer, China expects this year''s crude steel output to rise to between 690 million and 700 million tonnes from 627 million tonnes in 2010, mostly in line with industry estimates.
Highlighting brisk steel demand, the price of steel billet in northern China rose to as high as 4,520 yuan per tonne on Monday from around 4,440 yuan last week, said the Shanghai trader.
"A lot of construction work started in July, especially the social housing projects," he said.
Gains in spot prices lifted iron ore price indexes -- based on spot deals in China and which global miners use in setting contract rates -- to their highest since mid-May on Monday.
Iron ore with 62 percent iron content rose 0.7 percent to $178.50 a tonne on Monday, based on Platts index IODBZ00-PLT and a similar gauge by The Steel Index .IO62-CNI=SI gained 0.3 percent to $176.10.Metal Bulletin''s own 62 percent price index .IO62-CNO=MB ticked up to $175.75. China plans to launch its own iron ore price index this month, hoping to improve the country''s pricing power over the key steelmaking ingredient.
Iron ore forward swaps also jumped, suggesting market players are expecting price rises to extend.
Prices for swaps cleared by the Singapore Exchange jumped more than $3 for contracts from August 2011 through September 2012