SINGAPORE: Prices of iron ore swaps steadied near three-week highs on Thursday as traders bet demand for the steelmaking raw material would rise after the Chinese New Year break in February.
Hopes are growing that China's economy will be in better shape in the first half of 2013 after its new leader, who takes over in March, announced his commitment to pro-growth policies, boding well for demand in the world's biggest steel consumer.
Iron ore prices in the physical market turned higher this week after hitting six-week lows as traders began picking up cargoes for delivery over the next two months on expectations demand from top buyer China will recover.
"What we're looking at now in the physical market are cargoes to be delivered mid-January to mid-February. So you've got a few traders taking some position cargoes ahead of the Chinese New Year," said Rory MacDonald, iron ore broker at Freight Investor Services (FIS).
"While sentiment on December delivery was bearish, we're now looking at Jan-Feb delivery so the sentiment's better. There's always an expectation that you'll get a bit of a price spike after the Chinese New Year, so there is the same anticipation this time around."
A fall in Chinese steel prices this month to levels last seen in September prompted iron ore buyers to limit spot purchases. That pushed down the price of benchmark 62-percent grade iron ore to $115.30 per tonne on Monday, its lowest since Oct. 19.
The price has since recovered to $117.90 on Wednesday, based on data from information provider Steel Index. Price offers for imported iron ore cargoes in China rose by $1-$2 per tonne on Thursday, according to Chinese consultancy Umetal.
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