Singapore (Platts)--19Feb2013/742 am EST/1242 GMT

Seaborne iron ore prices gained ground Tuesday on the back of resilient demand for the steelmaking raw material, with mills continuing to stock up inventories as more positive sentiment for the steel market spread.

Platts assessed the 62% Fe IODEX $1/dmt higher at $159/dmt CFR North China.

Buying interest appeared to be warming up further as end-users and traders emerged in the market to procure spot shipments.

"There is a more active buying market today and we have been receiving more inquiries too," a Guangzhou-based trader said.

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A Shanghai-based trader said buyers are now willing to pay higher prices for spot cargoes as they expect the market to firm further.

"Even mills are willing to cough up higher prices now because they foresee prices will be comparatively stronger in March and would rather procure now."

On top of stronger demand for iron ore, available supply is also limited as sellers are holding back from offering spot cargoes with the expectation of higher prices to come.

An eastern Chinese mill source who was seeking seaborne iron ore to replenish a depleting inventory level said that many sellers refused to give any firm offers as they felt they would clinch firmer prices in the days to come.

The mill source also said that an Iranian miner who had five Capesize cargoes at hand had refused to give him a firm offer for the shipments and had asked him to come back a few days later instead.

"This is a sellers' market; firm offers are scarce," said a Jiangsu-based mill source. "Traders are taking positions and many are actually refusing to let their cargoes go easily as market sentiment is generally bullish going forward."

More positive expectations for China's steel market also aided in more bullish sentiment for iron ore prices.

"With the warmer weather in China boosting the country's construction industry, and real estate also performing well, there seems little to suggest that steel prices won't improve in the coming days," a Hong Kong-based trader said.

Physical steel prices were stable with spot square billet in Tangshan unchanged on the day at Yuan 3,330/mt ($532/mt) ex-stock, according to a Tangshan-based mill source.

Rebar futures also remained rangebound as the most active October contract last traded Yuan 13/mt higher day on day at Yuan 4,186/mt, and settled at Yuan 4,191/mt, down Yuan 17/mt from Monday.

But the Hong Kong-based trader was uncertain about whether steady steel prices would have a positive impact on iron ore prices as steel margins have not strengthened by the same magnitude as the steelmaking raw material, requiring some time to catch up.

Additionally, a Henan-based mill source said not all end-users urgently need to procure spot ore. "If like us, they anticipated that prices would spike like they normally do after Chinese New Year, then they would have bought more raw material before the holidays," the mill source said. "I don't really need to buy ore at the high prices like these today."

In the meantime, sources reported stronger demand for index-linked iron ore cargoes due to price volatility, with many welcoming floating prices above flat prices.

"When you are in need of iron ore and yet are not willing to commit to fixed priced cargoes due to market volatility, an index-linked cargo is a safe bet," said a Tangshan-based mill source.

A Singapore-based trader pegged the price of March-delivery Pilbara-Blend cargoes at an approximate premium of $1.50/dmt to the average of the Platts 62% Fe IODEX assessments for March.

VALE SELLS IOCJ FINES

Brazilian miner Vale returned to the spot market Tuesday after a 15-day absence, selling 80,000 mt of 64.7%-Fe Iron Ore Carajas Fines (IOCJ) at $168/dmt CFR China, according to traders who received the tender.

The parcel, which will load February 20 from Brazil, contains 1.2% alumina, 2.9% silica, 0.039% phosphorus, 0.75% manganese, 2.1% loss on ignition and 8.5% moisture. It will co-load with another parcel on a larger vessel, but the details of the second cargo were not known.

The trade price of $168/dmt CFR China was deemed too high to be repeatable by market participants, who mostly saw $165-166/dmt CFR China as a more suitable range for the current market.

The miner last sold 64.48%-Fe IOCJ January 31 at $161.61/dmt CFR China to trading house Tianjin Products & Energy Resources Development Company (Tewoo).

That 177,250 mt shipment will pass Singapore March 6.

--Celestyn Wong, celestyn_wong@platts.com
--Melvin Yeo, melvin_yeo@platts.com
--Edited by Alisdair Bowles, alisdair_bowles@platts.com

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