SINGAPORE: Spot iron ore prices were flat to higher and bids remained scarce on Thursday as the few buyers in the market exercised caution due to weak steel demand in top buyer China.
Chinese steel mills, burdened by huge inventories of steel products and thin demand, had been slow in buying iron ore after aggressive stockpiling early this year lifted prices of the steelmaking material to record highs in mid-February.
Iron ore prices have lost around 14 percent since hitting those peaks last month.
"Mills have big stocks of steel products and selling is very slow. That's the main problem for steel mills at the moment," said an iron ore trader in Shenzhen.
Shanghai steel rebar futures have been volatile of late, reflecting uncertainty on steel demand in China, the world's biggest consumer and producer.
The most traded October steel rebar contract on the Shanghai Futures Exchange slipped 0.4 percent to 4,708 yuan a tonne by the midday break.
The contract jumped nearly 2 percent on Wednesday after falling to four-month lows in the previous session.
"Buyers are cautious currently due to volatile moves in Chinese steel prices," Commonwealth Bank of Australia said of the iron ore market, but added that it expects some purchases to continue with port and mill stockpiles running low.
Indian ore with 63.5 percent iron content was quoted at $170-$172 a tonne, including freight, in China on Thursday, unchanged from earlier this week, said Chinese consultancy Umetal.
"People are saying prices could still drop to between $150 and $160," said the Shenzhen trader.
"But I think it's probably difficult for the market to go back up strongly again. At best, prices will be stable with mills only purchasing for short-term needs."
Iron ore indexes, based on spot deals in China and which global miners use in setting quarterly contract, were flat to higher on Wednesday.
The Steel Index's 62 percent benchmark rose 0.7 percent to $165.50 a tonne and Platts' 62 percent index stood at $168.50, unchanged for a fourth straight session.
Metal Bulletin's 62 percent index dipped 0.1 percent to $164.98.
Rio Tinto , the world's No. 2 iron ore producer, on Thursday hinted at moving away from the quarterly pricing system, noting that several miners are pricing ore on daily and monthly basis.
"We're seeing it is still an evolutionary process. This system has been accepted by a number of producers, but some are pricing according to quarter, daily or monthly," Sam Walsh, head of Rio's iron ore division, said at an industry conference in Beijing.
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