SINGAPORE: Iron ore rose to one-month highs as it stretched its winning streak to a 13th straight day, backed by firm demand from top buyer China amid signs Beijing is ready to fine-tune its prudent monetary policy.
China's central bank said on Wednesday that it will fine-tune its monetary policy if needed, underscoring analysts' view that Beijing is switching its focus to support a slowing economy and raising hopes of increased demand from the world's biggest commodity importer.
Chinese steel mills began replenishing their inventories of the steelmaking raw material after spot iron ore prices fell to a 22-month low below $117 a tonne in late October.
Iron ore with 62 percent iron content rose 0.6 percent to $147.20 a tonne on Wednesday, the highest since Oct. 19, according to the Steel Index.
Over the past 13 sessions, iron ore has climbed 26 percent, quickly rebounding from a near 31 percent slide in October.
With Chinese mills boosting ore stockpiles ahead of the end of 2011 and the Chinese New Year next year, "we may be in the early stages of a restocking period," said James Wilson, analyst at RBS Morgans.
"Most steel mills are rushing to purchase iron ore even if their inventory is not that low because they believe the market will see another round of increase," said an iron ore trader in the port city of Rizhao in China's eastern Shandong province.
"The market is really strong right now. We have sold almost 100,000 tonnes in the spot market in the past two days. Now we have ready cargo of 40,000 tonnes and another 80,000 tonnes still in the sea," the trader said, adding that his company only sold 20,000-30,000 tonnes last month.
FAIR GROUND
Firmer steel prices in China, both spot and futures markets, is helping encourage mills to buy more ore, suggesting steel demand in the world's biggest consumer and producer is picking up.
The most-traded May rebar contract on the Shanghai Futures Exchange rose 1.1 percent to close at 4,178 yuan a tonne, its third gain in five sessions.
Fewer available iron ore cargoes in the spot market is also supporting higher prices, with miners continuously raising offers.
In particular, shipments from India had been limited by logistical problems and higher production cost. Iron ore exports from India, the world's third biggest supplier, fell to 4.55 million tonnes in October from 6.87 million tonnes a year ago, the Federation of Indian Mineral Industries said on Wednesday.
Australian 61.5-percent grade Pilbara iron ore fines rose a dollar to $145-$148 a tonne, including freight, on Thursday, and Newman 63-percent grade fines increased $2 to $150-$152, said Chinese consultancy Umetal.
Rio Tinto , the world's No. 2 iron ore producer, sold Pilbara fines at $146 a tonne at a tender on Wednesday, up from $144.50 at Tuesday's tender, traders said.
But Wilson of RBS Morgans said $120-$140 a tonne is "fair ground" for iron ore prices.
"It's a good place to be for the foreseeable future. If prices go up too high then you risk causing too much problems with the steelmakers because their margins get squeezed," he said.
BHP Billiton has become more wary about the outlook for commodity markets as some players face tighter access to credit, but the world's biggest miner said conditions are not as bad as during the global financial crisis.
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