Expect iron ore prices in China to go up further said Chinese Importers mainly because of 1. Tighter Indian supplies of iron ore 2. Steel prices gaining momentum in China 3. Weakening Dollar 63.5 Fe cargo being quoted at $162/MT CFR China. Heavy rainfalls in eastern coast of India has made it difficult to ship any cargo.
Iron ore forward swaps extended recent gains and offers remained strong on Monday as tight Indian supplies offset mixed demand signals.
Iron ore prices stayed at 5-1/2-month highs on Friday, also supported by a surge in steel prices that was fueled by a global commodities rally after the U.S. Federal Reserve's second round of quantitative easing.
The dollar is trading at its weakest in nearly a year against a basket of major currencies.
"We believe the price will go up further, especially now with the commodity boom that we're seeing," said an iron ore trader in Rizhao at eastern China's Shandong province.
"We have 20,000 tonnes of 65.6 percent iron ore lump. We just want to hold it, we don't want to sell even though there are inquiries everyday. We're hoping there will be a further increase so we can sell it at a higher price."
The first-quarter contracts rose more than 1 percent to $155.75 for January SGXIOc3, $155.17 for February SGXIOc4 and $154.83 for March SGXIOc5, reflecting renewed market bullishness.
Swap prices had topped the benchmark index .IO62-CNI=SI which was steady at $153.20 a tonne, C&F China, on Friday.
"Any prolonged period without a strong Indian supply response will serve to keep the iron ore market tighter than would be expected, and underpin spot price levels," Macquarie Commodities Research said in a note.
Tightness in Indian supply, thanks to an ongoing ban on exports from the southern Karnataka state, has kept iron ore prices resilient amid wobbly demand from top buyer China where output of many steel mills are still being curbed to meet energy efficiency targets.
"While immediate fundamentals for iron ore look mixed at best, we believe that the outlook is extremely tight on a three-month view," said Macquarie.
"With Chinese New Year traditionally marking the peak steel inventory point, the current steel destocking cycle resulting from prolonged energy-related cutbacks is highly unseasonal.
"As such, any relaxation in this stance and confidence that targets have been met are likely to result in a rapid phase of Chinese output growth, requiring decent levels of iron ore import."
Non-Chinese buyers may also return to the market around the turn of the year, and combined with Chinese demand, may lead to a "strong run-up" in spot prices, said Macquarie.
But the current pace of ore restocking in China may alleviate the need for China to enter the spot market aggressively, added Macquarie, which estimates that the country may have restocked more than 10 million tonne of iron ore in the past two months.
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