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iron-oreSINGAPORE: Chinese steel futures rose to two-month highs on Wednesday, driven by hopes of more stimulus measures from Beijing to aid a slowing economy and backing further gains in iron ore prices that have leapt by more than 12 percent in the past two days.

 

Chinese steel producers, the world's biggest buyers of iron ore, returned to the spot market this week hungry for the raw material after last week's National Day holiday, helping push iron ore prices to their highest in 10 weeks.

 

But traders said some buyers are turning cautious given the rapid rise in prices, also abetted by fewer available spot cargoes, suggesting the price rally could soon hit a wall if steel demand does not take off.

 

The most briskly traded rebar contract for January delivery on the Shanghai Futures Exchange peaked at 3,697 yuan ($590) per tonne in morning trading, its highest intraday level since Aug. 13.

 

Benchmark iron ore with 62 percent iron content climbed 6.2 percent to $117.20 a tonne on Tuesday, its highest since Aug. 1, according to data provider Steel Index.  Iron ore has now gained 12.5 percent over the past two days.

 

"The price recovery is due to expectations of more policy measures by China to boost consumption growth including steel as well as restocking," said Helen Lau, senior commodity analyst at UOB-Kay Hian in Hong Kong.

 

Apart from cuts in interest rates and banks' reserve requirement to boost liquidity, China approved 1 trillion yuan worth of infrastructure projects last month to lift a slowing economy.

 

China is also likely to start a new round of incentive policies to encourage vehicle purchases in rural areas, the official China Securities Journal reported on Wednesday.

 

Copyright Reuters, 2012

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