Iron Ore-Prices steady, traders eye China's return

Iron Ore-Prices steady, traders eye China's return

* Forward swaps jump, Indian futures flat

* ArcelorMittal sees rebound in steel demand, prices

(Adds ArcelorMittal outlook, Indian futures)

By Manolo Serapio Jr  

SINGAPORE, Feb 8 (Reuters) - Spot iron ore prices remained steady on Tuesday with physical market activity only expected to pick up later in the week when top consumer China returns from a week-long Lunar New Year break.    

Key price indexes, which global miners use in deciding quarterly contract rates, have risen to record peaks before China went on holiday and analysts and traders say tight supplies of the steelmaking ingredient will keep prices high when Chinese markets reopen on Wednesday.

           

"It's seasonal restocking time and prices rose before the Chinese New Year as people tried to secure supplies before the holiday kicked in and there's usually a bit of a kick after the New Year as well," said James Wilson, analyst at Royal Bank of Scotland in Perth.        

"People are keeping a close eye on what happens after the Chinese return after the holidays but we're expecting it to be positive."

Steel rebar futures in Shanghai closed at a record high of 5,124 yuan per tonne on Feb. 1, a day before China shut for the Lunar New Year holiday, driven by rising cost of iron ore and coal and expectations of a pickup in steel demand. ArcelorMittal, the world's largest steelmaker, on Tuesday forecast a faster than expected recovery in demand and prices at the start of 2011 after a margin squeeze in the fourth quarter.  

"The gradual underlying demand recovery continues and we expect 2011 to be stronger than 2010," said Chairman and Chief Executive Lakshmi Mittal. The recent rally in spot iron ore prices is likely to push up second-quarter contract rates to a record $165 a tonne for Australian fines with 62 percent iron content, free on board, a Reuters poll showed.

SWAPS RISE

Platts' 62 percent iron ore index IODBZ00-PLT was flat on Monday at $187.25 a tonne, cost and freight delivered to China, a record level reached last week. The Steel Index (TSI) 62 percent iron ore benchmark .IO62-CNI=SI was also steady at $185.60 and Metal Bulletin's 62 percent gauge .IO62-CNO=MB was unchanged at $183.36. The market was mostly quiet at the start of the week with a few tentative inquiries, TSI said in a note, adding "activity can be expected to start picking up again gradually later in the week, as the holiday period comes to an end." The forward swaps market reflected investors' upbeat sentiment with prices gaining on Monday.

The Singapore Exchange-cleared February contract rose $1.50 to $184.75 a tonne, March climbed $2.12 to $176.37 and April gained $1.75 to $167.87. In India, iron ore futures were little changed after recent gains. At 0716 GMT, 62 percent ore for March delivery on the Indian Commodity Exchange eased 0.1 percent to 8,078 rupees ($178) a tonne, including freight cost to northern China. A similar contract on the Multi Commodity Exchange

was up 0.1 percent at 7,492 rupees a tonne, free on board. The two exchanges launched the world's first iron ore futures contracts on Jan. 29 but volumes have been modest with trading limited to domestic players.  

($1 = 45.33 rupees)    

           

 (Reporting by Manolo Serapio Jr.; Editing by Manash Goswami)