Thursday Jan 27, 2011
* Buying activity slows as Lunar New Year nears
* Offers firm as Indian freight cost up
* Australia's Port Hedland reopens after cyclone (Adds trader's comment, swaps, details)
By Manolo Serapio Jr.
SINGAPORE, Jan 27 (Reuters) - Spot iron ore prices remained firm on Thursday as key indexes steadied near record highs, supported by tight Indian cargoes even as Chinese buying stalled ahead of the Lunar New Year holiday next week.
Key ports at top iron ore exporter Australia reopened after briefly shutting due to a cyclone, helping calm supply concerns.
Iron ore exports from India, already falling thanks to a ban on shipments from its southern Karnataka state, are likely to get costlier after India's railway operator raised freight cost on iron ore exports by 50 percent from Thursday as it rides on rising prices of the steelmaking ingredient.
India is the world's third-largest iron ore exporter, although its shipments have dropped for the sixth straight month in December because of the Karnataka ban.
Indian ore with 63.5 percent iron content was being quoted around $193-$195 a tonne, cost and freight to China, up from about $190 earlier in the week, although takers were scarce, traders said.
"The physical market is still strong because of tight supply but there's no buying interest," said an iron ore trader in Singapore.
"If somebody has to sell a cargo within this week they have to lower the price. Otherwise, those who have cleared their positions and are not in a hurry to sell will wait until after Chinese New Year."
China's week-long Spring Festival holiday begins on Feb. 2.
Platts' 62 percent iron ore index IODBZ00-PLT was flat at $186 a tonne, cost and freight delivered to China, on Wednesday, just a tad off the record $186.50 hit last week.
The Steel Index (TSI) 62 percent benchmark .IO62-CNI=SI ticked up 20 cents to $185.60 a tonne, just off the record $185.70 touched last Friday.
Metal Bulletin's 62 percent gauge .IO62-CNO=MB slipped 27 cents to $183.21 a tonne after hitting a record $184.43 on Monday.
PORT HEDLAND REOPENS
"Chinese market participants have their minds firmly on the impending Spring Festival celebrations," TSI said in a note, adding the market was "extremely quiet" on Wednesday "with very few Indian cargoes moving and little if anything from Australia with Port Hedland closed temporarily by a cyclone."
Port Hedland, Australia's major iron ore export terminal, reopened to all shipping traffic on Thursday. Rio Tinto , the world's No. 2 iron ore supplier, said it was resuming normal operations at its Port of Dampier iron ore terminal in northwest Australia after a passing cyclone briefly forced it to restrict port operations.
Prices of iron ore forward swaps <0#sgxios:> rose on Wednesday although levels were below the current indexes.
The Singapore Exchange-cleared February contract gained a dollar to $179.50 a tonne, March added 22 cents to $169.10 and April was up 55 cents at $161.80.
Singapore and rival bourses in the United States and Europe are competing for business in the iron ore swaps market, hoping to attract steelmakers into hedging iron ore costs after the industry moved to a quarterly contract pricing system afer the collapse of a decades-old annual benchmark scheme.
But the increasing need for a more transparent pricing mechanism has India and Singapore racing to launch the world's first iron ore futures market this year.
(Reporting by Manolo Serapio Jr, sourced Reuters)