SINGAPORE: Spot iron ore prices stayed near July highs above $130 a tonne as healthy order books are expected to keep Chinese steel production high, supporting demand for the raw material.
Shanghai steel futures hit near two-week highs on Tuesday before turning steady, extending last month's gains as falling Chinese steel inventories suggest firm consumption.
"Mills are trying to buy more cargo because they're running low again. Some of the mills have order books full all the way to November," said an iron ore trader in Singapore.
China's crude steel output has averaged above 2 million tonnes a day since mid-February, hitting a record pace of 2.193 million tonnes in May. It was at 2.130 million tonnes on July 11-20, based on the latest available industry data.
Ore with 62 percent iron content gained 10 cents to $130.20 a tonne on Monday, according to data provider Steel Index.
Iron ore, China's top commodity import in terms of volume, peaked at $132.60 in July, its highest since April 30.
"We could see $133 this week," the trader said.
On Tuesday, trading platforms in Singapore and China showed firm bids for spot iron ore cargoes, traders said.
Global miner BHP Billiton is offering to sell 120,000 tonnes of 57.7-percent grade Australian Yandi iron ore fines at a tender closing later in the day, traders said. That grade is currently being offered in the spot market at around $121 a tonne.
The most briskly traded rebar contract for January delivery on the Shanghai Futures Exchange hit a session high of 3,693 yuan ($600) a tonne, its loftiest since July 25. It was little changed at 3,679 yuan by the midday break.
Still, some traders see downside risks to iron ore prices unless steel beats levels seen in July.
Spot prices of rebar, a steel product used in construction, in Shanghai hit a high of 3,700 yuan a tonne last month and was trading at around 3,640 so far this month, a Shanghai-based trader said.
"I don't think current steel prices will support iron ore above $130," he said.
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