SINGAPORE, Jan 19 （Reuters） - Key iron ore price indexes were on track to hit record highs on Wednesday, with spot prices closing in on $200 a tonne, aided by strong Chinese buying ahead of the Lunar New Year and persistent worries over tight supply.
Rising prices of steelmaking materials like iron ore as well as coking coal, after floods ravaged top producer Australia, drove Shanghai steel rebar futures to a record high for a third time in less than a week.
High-grade Indian ore was sold in the spot market this week at $188.50 a tonne, including freight, a level not seen since spot prices hit a record around $200 in February 2008.
Indian ore with 63.5 percent iron content was being quoted at $192 a tonne on Wednesday, said an Indian trader in Orissa.
"The way buyers are buying, the price will touch $200 although exporters in India are becoming cautious on how long the prices can be sustained," he said.
With global steel demand shaky, iron ore spot prices which have rallied since the year started, could be prone to a correction soon with some buyers from No. 1 importer China turning cautious as prices approach record highs, traders said.
"There's underlying fear that iron ore prices are going up a bit too fast," said a physical iron ore and steel trader in Singapore.
"I don't see end-users jumping to buy steel so I don't know how these prices can be sustained," he said, adding traders are dominating iron ore purchases instead of steelmakers, suggesting the rally is driven by speculative activity instead of real demand.
The outlook for the global steel sector is stable with the worst behind the industry after the economic downturn, although recovery is still relatively slow and not expected to accelerate, Standard & Poor's lead analyst Andrey Nikolaev said on Tuesday.
The most active rebar futures in the Shanghai Futures Exchange rose to a contract peak of 4,941 yuan per tonne on Wednesday, as raw material prices climbed. It closed at 4,931 yuan, up 0.4 percent.
EYEING RECORD
Iron ore supply from India, already tight due to an export ban in the southern Karnataka state, is being limited by weather-related transport problems, while Brazilian cargoes are also fewer due to heavy rains there, traders said.
Brazil and India are the world's second- and third-largest iron ore exporters, respectively.
"Steel mills are still able to earn some profit after raising product prices for February, but I don't think it's proper to stock up too much ore, although some believe it's a good time to buy because they're betting prices will go higher in the second quarter," said a trader in northern China.
The Platts 62 percent iron ore index IODBZ00-PLT rose 1.4 percent to $185 a tonne, cost and freight delivered to China, on Tuesday.
That is just a dollar away from the $186 posted on Platts on April 20 last year, the highest since the reference price provider began publishing daily iron ore prices in June 2008.
The Steel Index's （TSI） 62 percent benchmark .IO62-CNI=SI edged up 60 cents to $181.40 a tonne, also near its record $184.80 reached last April 23.
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