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.


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."

The Platts 62 percent iron ore index hit a record of $186.50 a tonne on Thursday, while the Steel Index 62 percent benchmark .also touched a record of $185.40.

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.

But a sharp decline in forward swaps on Thursday suggested prices could ease in the near term.

The Singapore Exchange-cleared February contract dropped 1.9 percent to $177.38 a tonne and March fell 2.8 percent to $172.38.


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