SHANGHAI: Spot iron ore prices extended gains on Wednesday as more steel mills in China returned to the market to replenish stockpiles ahead of the new year, but a sombre outlook for steel demand may limit the upside.
Spot prices have begun stabilising this week, with offers of 61.5 percent Pilbara fines being offered at $134-136 per tonne on Wednesday, including cost and freight, compared with $132-134 from the previous day, Chinese consultancy Umetal said.
"More steel mills are making bookings before prices rise further, driving up spot prices, but we are not sure how long this recovery will sustain," said an iron ore trader in Beijing.
Chinese steel mills, producing nearly half of the world's steel output, turned out lower daily steel output in early December, falling by 0.69 percent to 1.674 million tonnes from the preceding 10 days, industry data showed.
Lower output and sluggish demand for steel during the winter have forced mills and traders to remain cautious, and their reluctance to make sizable bookings could limit the upside.
"What I only expect is there will be a new wave of price hikes in January, but I can't say for sure how much prices will be able to rise as the macroeconomic situation hasn't changed fundamentally," said a second iron ore trader in Shenzhen city.
Iron ore index with 62 percent Fe grade rebounded to $132 per tonne on Tuesday, up 0.53 percent from Monday.
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