Iron Ore-Spot prices firm on healthy outlook

Fri Sep 2, 2011

* Major indexes hit nearly four-month high
* Chinese buying interest picks up, lack of large purchases
* Shanghai rebar falls marginally, outlook healthy

SHANGHAI, Sept 2 (Reuters) - Spot iron ore prices were steady on Friday, as miners held offers firm amid an anticipated pick-up in Chinese steel demand as well as the continued tightness in supply from India, pushing up global indexes to nearly four-month highs.

The persistent shortage of iron ore exports from India's southern Karnataka state as well as the approaching peak consumption season in China have sustained the strength in iron ore offers.

"Although after 2-3 weeks the monsoon will finish in Goa, Indian supplies are likely to remain affected by high court rulings and investigations causing mine suspensions," The Steel Index .IO62-CNI=SI (TSI) said in a daily note on Friday.

Karnataka introduced a ban on exports in July 2010 which it said aimed to curb illegal mining. The Supreme Court ordered the export ban lifted in April although the southern state has yet to issue export permits.

Several tender cargoes from Australia, the world's largest iron ore exporter, were sold at firm levels, TSI added.

Chinese steel mills have been producing more than 1.9 million tonnes of crude steel per day since February, from an average 1.7 million tonnes last year, in expectation that steel demand will pick up in September and October.

"The spot market is firm this week amid growing buying interest from Chinese steel mills, but the market is still lacking active purchases in large volumes at the moment," said an iron ore trader in Shenzhen.

Global iron ore miners are likely to keep iron ore contract prices steady in the fourth quarter, with spot prices stabilising on solid Chinese demand and tight supplies, based on global indexes which are used by suppliers to fix quarterly pricing.

Platts Iron Ore Index for 62-percent grade IODBZ00-PLT surged $2 to $182.25 a tonne on Thursday, its highest since May 11.

TSI's similar gauge rose half a dollar to $180.4 a tonne, its highest since May 6, and Metal Bulletin Iron Ore Index .IO62-CNO=MB gained 49 cents to $179.98 a tonne, a level never seen since May 9.

Australian 62 percent Newman fines stood steady at $183-$185 a tonne, including freight, on Friday, and Indian 63.5/63 fines climbed to $187-$190, from $187-189, according to Chinese industry consultancy Umetal.

The most active January rebar contract on the Shanghai Futures Exchange fell marginally by 0.27 percent to 4,816 yuan ($755) per tonne on Friday.

Iron ore swaps cleared by the Singapore Exchange <0#SGXIOS:> gained for all contracts on Thursday. ($1 = 6.381 Chinese Yuan)