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PrintSpot iron ore jumped to a three-month high above $138 a tonne, spurred by Chinese mills replenishing winter supplies and traders anticipating further price gains amid a better outlook for the economy.
Shanghai steel futures rose to their highest since late September on Wednesday and iron ore futures in Dalian climbed to a one-month peak. Iron ore swaps also stretched recent gains.
"I think there's a bit of a realisation that the outlook on China for the next few months is not as bad as people anticipated," said Jamie Pearce, head of iron ore broking at SSY Futures.
A government index measuring China's manufacturing activity stayed at an 18-month high in November, according to a survey released earlier in the week, underlining the resilience of the world's No. 2 economy as Beijing seeks structural reforms.
Iron ore for immediate delivery into China's Tianjin port.IO62-CNI=SI rose 1 percent to $138.20 a tonne on Tuesday, the highest since Sept. 3, according to data compiler Steel Index.
Iron ore, the top moneymaker for global miners Vale and Rio Tinto , has traded in a tight range between $131 and $138 over the past three months and Tuesday's jump suggests there may be momentum to push the price above $140.
"When you see an exuberance of this sort it usually lasts for about a week so I won't be surprised if $140 is breached soon," said a Shanghai-based iron ore trader, adding mills were also building winter stockpiles.
"We have taken a lot of positions and we're holding about half a million tonnes. But it's not that easy to get some sales at good numbers," the trader added.
STEEP DISCOUNT
Iron ore swaps <0#SGXIOS:> rose further, with the December and January contracts advancing for a fifth session running. The December contract climbed to $139.50 a tonne after settling at $137.31 on Tuesday, while January rose to $139 from $137, traders said.
Investors were buying up first-quarter swaps which have been trading at a steep discount to spot, said Pearce at SSY Futures. "It's a mixture of people buying into the discount and people stopping out of short positions," he said.
First-quarter swaps contract last traded at $136.50, after closing at $134.66 on Tuesday.
In China, the most-traded rebar for May delivery on the Shanghai Futures Exchange rose as high as 3,727 yuan ($612) a tonne, its loftiest since Sept. 24. It closed 0.4 percent higher at 3,713 yuan.
The most-active iron ore for May delivery on the Dalian Commodity Exchange touched a one-month high of 955 yuan per tonne, before closing at 952 yuan, up 1.5 percent.
Dalian iron ore is the world's first futures contract for the raw material that is backed by physical delivery and has seen brisk volumes since it was launched on Oct. 18 as China seeks to shift commodity pricing benchmarks from West to East.
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