SINGAPORE: Iron ore rose to a 1-1/2-week high above $62 a tonne after a recent drop to its lowest level in nearly six years spurred some buying interest in spot cargoes, although further gains are likely to be limited ahead of the Lunar New Year holiday.
Slower steel consumption in top market China has prompted some large mills to scale back production, with output of big producers down from mid-January, according to estimates by the China Iron and Steel Association.
"Steel sales are very poor and even if iron ore prices have gone down, most Chinese mills are still incurring losses," said a trader in Shanghai.
Iron ore for immediate delivery to China's Tianjin port rose nearly 1 percent to $62.20 a tonne on Tuesday, according to data compiled by The Steel Index (TSI). The price hit $61.10 last week, its lowest since May 2009.
A flurry of buying activity helped push up the benchmark price with some Chinese traders shopping for cargoes arriving in March although there were few steel mills buying, TSI said.
"The recent pick-up in prices is supported by March iron ore delivery when construction activity is expected to begin reviving following a seasonal slowdown," ANZ Bank said in a note.
Top iron ore miner Vale expects iron ore to trade between $70 and $79 a tonne in the second quarter and to stay there for most of the year, the Brazilian company's chief executive, Murilo Ferreira, said.
Despite lower iron ore prices, Ferreira said he did not expect any writedowns on Vale's assets.
After falling 47 percent last year, iron ore has dropped a further 13 percent so far in 2015 amid a glut, as big, low-cost miners lifted output to ship more to China where steel consumption shrank last year for the first time since 1981.
Trading activity in China is expected to slow down as market participants take off during the week-long Lunar New Year break that starts from Feb. 18.
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