Offers to sell imported iron ore in China topped $180 a tonne on Wednesday, a level last seen in April 2010, buoyed by demand from steelmakers that are boosting stockpiles ahead of the Lunar New Year next month.
Most of the three major iron ore indexes stayed near or touched new eight-month highs on Tuesday after rising more than 40 percent in 2010, supported by tight supplies and strong demand from top buyer China.
"January prices will remain strong, the reason being steel mills have to buy for Chinese New Year, and the shortage of supply from India and the floods in Australia are keeping the upward momentum," said an iron ore trader in Singapore.
A continuing ban on iron ore shipments from India''s southern Karnataka state and transport problems in the eastern coast have shrunk exports out of India, the world''s No. 3 supplier of the steelmaking raw material.
But market players were also keeping watch on Australia''s record floods and the potential disruptions to exports from the world''s biggest iron ore miner.
The worst flooding in decades is causing catastrophic damage to infrastructure in the state of Queensland and have forced 75 percent of its coal mines, which fuel Asia''s steel mills, to grind to a halt, the state''s premier said on Ports in Australia''s Pilbara iron ore belt shipped an average 1.05 million tonnes a day in 2010, representing 38 percent of global supply, "hence any prolonged closure or storm damage could potentially have a significant impact on seaborne supply," Macquarie Securities said in a recent note. Traders said Indian ore with 63.5 percent iron content was being offered at $179-$181 a tonne, including freight, on Wednesday, up from $177-$179 in the past two weeks.
POSITIVE SENTIMENT
"Offers are coming in higher than $180, so there''s room for prices to touch that level. There''s positive sentiment in the market," said the Singapore-based trader.
Prices can move closer to $200 a tonne if the "situation in Australia worsens and iron ore exports are affected," he added.
Iron ore prices touched a two-year high of $186 a tonne, based on Platts'' iron ore index IODBZ00-PLT, on April 2010.
Firmer steel prices were also encouraging steel mills to buy iron ore.
The most active May rebar futures on the Shanghai Futures Exchange was off 0.2 percent at the midday break after rising to their highest in more than seven weeks in the previous session. The Platts 62 percent iron ore index edged up $1.50 to $172.50 a tonne, C&F, on Tuesday, its highest since May 10, 2010.
The Steel Index 62 benchmark .IO62-CNI=SI rose nearly a dollar to $171 a tonne, and Metal Bulletin''s 62 percent gauge .IO62-CNO=MB gained 48 cents to $167.61.
Forward swaps also rose as investors anticipate further price rises. The Singapore Exchange-cleared January contract gained $1 to $171 a tonne on Tuesday and the February contract rose 92 cents to $169.92.
Chinese appetite for iron ore is expected to stay strong this year although import growth may not be as brisk as in 2010 as Beijing works to contain money supply and credit rise to curb inflation that is running at a 28-month high.
The official China Securities Journal reported on Wednesday that the Chinese central bank is planning to begin this year a monthly review of banks'' reserve requirement as part of a wider monetary policy reform.