Iron ore rebounded from seven-month lows as weaker prices spurred some buyers to snap up spot cargoes, but a sluggish steel market could cap gains.
Chinese iron ore futures also rebounded on Thursday after a four-day slide, a day after China said iron ore imports reached an all-time high in January, although Shanghai steel futures
remained near a record low.
Iron ore for immediate delivery to China .IO62-CNI=SI rose 0.8 percent to $121 a tonne on Wednesday, according to data provider Steel Index.
That followed a five-day fall that pulled the price to its lowest since July on Tuesday, encouraging some buyers to return to the market to pick up Australian and Brazilian cargoes.
"I doubt whether this price increase can last because steel demand remains weak and there's still plenty of iron ore supply in the spot market," said an iron ore trader in Shanghai.
"We're not buying anything at the moment. We're bidding for some cargoes but we're bidding very low because we think the market could weaken further in March and we don't want to take
Iron ore for delivery in May on the Dalian Commodity Exchange gained half a percent to 853 yuan ($140) a tonne.
Activity in China's construction sector, a major consumer of steel, typically picks up in March as temperatures rise, pressuring prices before then.
The most-traded rebar for May delivery on the Shanghai Futures Exchange touched a session low of 3,383 yuan a tonne, a tad off a record low of 3,380 yuan reached on Monday.
It was nearly flat at 3,394 yuan by midday.
A surge in China's iron ore imports last month also aided sentiment in the market. Purchases by the world's top importer reached 86.8 million tonnes, up more than 18 percent from the previous month and trumping the previous record set in November.
"We think the high level is a direct result of stockpiling ahead of the expected March steel market pick-up and taking advantage of lower prices in the final weeks of 2013," Morgan Stanley analysts said in a note.
"Perversely, this big import figure could be detrimental for spot iron prices in the near term if mills currently hold sufficient inventory cover and have no need to enter the spot
Stockpiles of imported iron ore at China's major ports swelled to 97.25 million tonnes last week SH-TOT-IRONINV, the biggest they have been since October 2012.
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