Spot iron ore prices rose to almost 15-month highs, sustaining a rally that began last month and could extend amid a limited supply of spot cargoes, as top buyer China rebuilds stockpiles on hopes a mending economy will buoy steel demand.
Concern that an upcoming cyclone season could disrupt supply from top iron ore exporter Australia and firmer Chinese steel prices could stretch gains in iron ore prices which have already surged by a third since early December.
Benchmark iron ore with 62 per cent iron content rose 0.4 per cent to $153.90 a tonne on Monday, the highest since October 14, 2011, based on data from Steel Index.
Iron ore, the raw material used to make steel, has rebounded 77 per cent since hitting three-year lows below $87 in September as Chinese appetite bounced back along with signs its economic growth is picking up.
"There's a lot of speculative buying going on and supply in the open market has been relatively short," said Jamie Pearce, head of iron ore broking at SSY Futures.
Slower domestic production of iron ore in China, especially in the northern regions due to winter, and limited flows of spot cargoes from Australia, Brazil and India have also helped push up prices, said Pearce.
A cyclone is expected to develop later on Tuesday off Australia's northwestern coast before approaching the Pilbara iron ore mining region, weather forecasters said.