* Construction activity boosting demand for rebar
* Iron ore price indexes rise, offers firm
By Manolo Serapio Jr
Higher steel prices helped boost demand for iron ore, the key steelmaking ingredient, lifting price indexes on Thursday, although traders said some Chinese mills are more keen on buying lower-grade material.
"Iron ore prices may remain firm next week as steel prices will continue to edge up amid construction activities," said an iron ore trader in Beijing.
"Rebar and wire rod producers are enjoying high profit margins and I don't expect iron ore prices to fall easily."
China's steel production could maintain its breakneck pace in the second half of 2011 as a construction boom buoys demand, with full-year output seen hitting at least 700 million tonnes, a new record, as mills cash in on rising prices.
The most-traded October rebar contract on the Shanghai Futures Exchange rose 0.2 percent to 4,925 yuan a tonne by the midday break. It has risen 1.1 percent for the week, its third straight week of gains.
Iron ore price indexes, based on spot deals in China and used by global miners as basis in deciding supply contract prices, rose on Thursday.
The price of ore with 62-percent iron content rose 50 cents to $175.10 a tonne, based on The Steel Index .IO62-CNI=SI, and gained 18 cents to $173.46 a tonne, according to the Metal Bulletin .IO62-CNO=MB.
Platts index IODBZ00-PLT showed the 62-grade price at $176.75, up 25 cents.
"It's difficult to push the price up strongly because the mills have been quite selective on the grade," said a shipping manager for an iron ore trading firm in Shanghai.
"They are now more interested in low-grade fines at 52-55 (iron content) which they tend to mix with high-grade fines that they get from long-term contracts."
Offers for 62-grade Newman fines from Australia were steady at $179-$181 a tonne, with freight, on Friday, said Chinese consultancy Umetal. Quotes for Indian 63.5/63 ore were also unchanged at $182-$184.
Traders said global miner BHP Billiton sold 90,000 tonnes 62.5-grade Newman fines at $180 a tonne, cost and freight, and another 80,000 tonnes of 61.5-grade MAC fines at $174 a tonne, in line with market expectations.
Hopes are high that China's demand for steel and iron ore will strengthen further amid a busier construction sector and optimism that Beijing may relax credit restrictions in the second half of the year.
"Some mills are expecting China to lift some restrictions on credit control so the liquidity situation might be better in the second half," said the Shanghai trader, but added it was not clear how the credit curbs may be eased.
Beijing has been taking aim at property prices, limiting the number of homes people may purchase in some cities and ordering banks to limit their loans to the sector.
That has come on top of interest rate rises and other monetary tightening aimed at containing inflation, which has made it harder for mills and their customers to obtain loans.
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