Index-based spot iron ore prices edged up to fresh record highs and looked set to sustain their momentum on Monday as top consumer China continues to build steel product stockpiles in anticipation of a recovery in demand.
Data showed China imported a record 68.97 million tonnes of iron ore in January, up 18.8 percent from the previous month.
Tight seaborne supplies of iron ore should also keep prices firm. India's Supreme Court on Friday delayed a hearing on a 6-1/2-month ban on iron ore exports from its Karnataka state to April 4 from mid-February.
Chinese steel prices have continued to rise after China's Lunar New Year break ended on Feb. 8, with Shanghai rebar futures little changed on Monday after hitting a series of record highs last week.
Chinese domestic steel prices have followed the gains in futures as traders built stocks, although end-user demand remained scarce.
"With end-user demand, particularly from construction, at its lowest over the New Year period, traders typically take the opportunity to build inventory at this time of year," Macquarie said in a note.
"As such, we do believe that steel prices can continue to move up in the near term, but a strong return of end-user participation will be required to ensure the next leg of price rises."
That should translate to more demand for iron ore, the main component in making steel, traders said.
On Friday, Platts' 62 percent iron ore index IODBZ00-PLT rose 75 cents to a record $191 a tonne, cost and freight delivered to China.
The Steel Index (TSI) 62 percent iron ore benchmark .IO62-CNI=SI gained 90 cents to $188.90 and Metal Bulletin's 62 percent gauge .IO62-CNO=MB jumped $2.22 to $188.12, also both all-time highs.
"I wouldn't be surprised if it (TSI 62 percent) broke $200 before the end of February because I don't see any reason why prices would do anything other than continue to increase," said Rory MacDonald, head of iron ore operations at TSI.
Indian ore with 63.5 percent iron content was quoted at $197-$199 a tonne, including freight to China, on Monday, said Chinese consultancy Mysteel.
Forward swaps mostly advanced on Friday although the market remained in backwardation. The Singapore Exchange-cleared March contract rose $1.18 to $181.62 a tonne and April was almost steady at $171.75.
"The fact that forward prices are priced at a discount to spot is symptomatic of nervousness and doubts around the ability of the market to sustain levels already at all time highs," said MacDonald.
"The market has continued to surprise people, spot prices have strengthened further than swap market participants thought that they would."