Singapore, 21 January 2011

Key iron ore indexes rose to record levels last week, buoyed by a brisk market where tight supplies and strong Chinese buying have pushed up spot prices to their highest since February 2008. The Platts 62 percent iron ore index gained 50 cents to $186.50 a tonne, a record for Platts since it began providing prices in June 2008.

Top Indian iron ore exporter Sesa Goa sold high-grade ore at about $193 per tonne at a tender this week as spot prices close in on the record of around $200 last seen in February 2008.

"We're very optimistic the market will hit $200 at the rate buyers are buying," said a Shanghai-based trader. Iron ore prices have rallied so far this year as Chinese steelmakers replenish stocks of the steelmaking ingredient ahead of the Lunar New Year next month after state-imposed production curbs in the latter part of 2010.

Supply has also been tight, with fewer cargoes out of Brazil due to rainy weather and Indian exports hampered by logistical problems and a ban on shipments from its Karnataka state since July.

India's Supreme Court has put back to mid-February a decision on lifting the Karnataka ban and asked the state to draw up new rules for when the current ban expires at the end of this month, lawyers said on Thursday.

The Steel Index (TSI) 62 percent benchmark rose $2.70 to $185.40 a tonne, cost and freight delivered to China. It was also the highest for the index since TSI began publishing daily reference prices in December 2008.

Global miners including Brazil's Vale , the world's biggest iron ore producer, use the Platts index to decide prices for quarterly contracts, which analysts say are likely to rise again in the second quarter after an estimated 7-8 percent hike in January-March.

Rio Tinto and BHP Billiton , the next two biggest iron ore miners after Vale, both reported this week record output for the December quarter as they cashed in on soaring prices to fill swelling demand from top importer China and other parts of Asia.

Rising cost of raw materials such as iron ore and coking coal, after floods swamped top exporter Australia, have prompted steelmakers across Asia to lift product prices even as demand remains wobbly.

Steel rebar futures on the Shanghai Futures Exchange hit a record for the third time in a less than a week on Wednesday.

Iron Ore-Spot prices eye $200/T

Iron ore spot prices in Asia remained strong on Friday and looked set to hit $200 a tonne soon, buoyed by demand from top buyer China and fewer high-grade cargoes.

The rally that began at the start of the year lifted key price indexes to record levels on Thursday and traders say the momentum could extend to at least next week before the Chinese week-long Lunar New Year holiday starts.

Chinese New Year kicks off on Feb. 2. "There's not much high-grade cargo available and that's the reason why prices are rising," said an iron ore trader in Singapore.

"And the Chinese have no option so the buying activity will continue until next week. If supply remains tight when they are back from holiday, prices will continue rising."

Iron ore supply has been tight, with fewer cargoes out of Brazil due to rainy weather and Indian exports hampered by logistical problems and a ban on shipments from its Karnataka state since July. Brazil and India are the world's second- and third-largest exporters of the steelmaking material. Chinese imports from the two countries fell in 2010.

Rising prices of iron ore as well as coking coal, another ingredient in producing steel, after floods hit top supplier Australia have pushed up Shanghai rebar futures to a record level for a fourth time in a week, although volumes have steadily fallen from November.

The most active May rebar contract on the Shanghai Futures Exchange rose as high as 4,956 yuan a tonne, before closing at 4,950 yuan, up 0.7 percent.

SWAPS FALL

Indian ore with 63.5 percent iron content was being offered at $188-$190 a tonne, cost and freight delivered to China, on Friday, steady from the previous day, said Chinese consultancy Mysteel.

"My company has decided to save some material for selling after the (Chinese New Year) holiday and we have stopped offering now as we can't see any signals for prices to ease," said a Beijing-based iron ore trader. "It seems prices will hit $200 per tonne soon."

Ends --

By Manolo Serapio Jr, Reuters - for Commodities Now.