SINGAPORE: Spot iron ore prices climbed to their highest in almost two months on Tuesday as steel mills from top buyer China snapped up cargoes to replenish stockpiles, encouraged by higher steel prices which also hit their loftiest since August.
Miners are gradually increasing offers of iron ore cargoes in the spot market as more and more Chinese buyers return after last week's public holiday, although traders say some buyers could soon recoil if prices rise too fast.
"Overall sentiment has been a lot better with the Chinese returning this week," said Jamie Pearce, head of iron ore brokering at SSY Futures, part of the shipbroking group Simpson Spence and Young.
"We have seen Chinese mills bidding high numbers on physicals to try and secure cargoes," said Pearce, adding that the Chinese were also the main buyers of iron ore forward swaps so far this week.
Benchmark iron ore with 62 percent iron content surged almost 6 percent to $110.40 a tonne on Monday, the highest since Aug. 16, according to data provider Steel Index.
It was the biggest single-day gain since early September for iron ore which didn't move last week during with China's national holiday.
The upward momentum looks likely to continue, with sellers lifting price offers for imported cargoes to China by as much as $6 per tonne on Tuesday, traders said.
More cargoes are also on offer after prices spiked at Monday's sale tenders by miners Vale and BHP Billiton , traders said.
Brazil's Vale, the world's top iron ore exporter, sold a 65-percent grade cargo at $125 a tonne, including freight, up from a previous deal of about $116, said a trader in Shanghai. Third-ranked BHP Billiton sold 57.7-percent grade Yandi iron ore fines at $106.65 per tonne, he said, versus $99.50 before the Chinese holiday.
BHP Billiton is selling another 190,000-tonne of Yandi fines on Tuesday, while Vale is offering 150,000 tonnes of 63.2-percent grade material and Rio Tinto is selling 165,000 tonnes of 61-percent grade Pilbara iron ore fines, traders said.
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