* Rio Tinto 2012 iron ore output at record 253 mln T

SINGAPORE, Jan 15: Iron ore slipped further after hitting 15-month highs last week as buying interest from top importer China eased, although traders say a recovery in steel demand and more restocking by mills ahead of the Lunar New Year should keep prices supported.
Most Chinese mills slowed iron ore purchases after prices have surged by more than a third since December, but with steel demand staying mostly firm, there remains a strong incentive for producers to boost steel output, requiring more raw material.
‘Most steel mills are now making profit of 100 to 200 yuan ($16 to $32) per tonne. It may just be a matter of time before they go back to the spot market to buy more iron ore, especially with the Lunar New Year coming,’ said an iron ore trader in the port city of Rizhao in China’s eastern province of Shandong.
Chinese steelmakers usually stock up on iron ore ahead of the Lunar New Year which falls in early February this year. The country’s monthly imports of iron ore topped 70 million tonnes for the first time in December, pushing miners to lift production.
Rio Tinto , the world’s No. 2 iron ore producer, said output last year came in above guidance at a record 253 million tonnes, as the miner cashed in on resurgent Chinese demand.
Benchmark iron ore with 62 percent iron content dropped 0.2 percent to $154.60 a tonne on Monday,according to Steel Index.
The price has now fallen more than 2 percent since hitting $158.50 last Tuesday, its loftiest since October 2011. But it remains up 78 percent from three-year lows hit in September.
‘I think the price will stabilise at around $150 to $155 for the rest of this month. I don’t see a big collapse. The volume of cargoes in the spot market is still limited,’ said the Rizhao trader, adding that Chinese steel prices remained mostly firm.
Shanghai rebar futures have gained nearly 15 percent since early December, hitting a six-month high of 4,047 yuan per tonne last week.
Still, the recent decline in buying interest prompted sellers to slash iron ore price offers for a second day on Tuesday, based on import prices quoted by Chinese consultancy Umetal. Price offers for all foreign cargoes dropped by as much as $3 per tonne, it said.
Top miner Vale sold a 90,000-tonne cargo of 63.8- percent grade lump ore at a tender on Monday, which a Singapore trader said would imply a price of $141 for 62-percent grade iron ore fines, much lower than the current benchmark rate.
While end-user steel demand prospects in China are improving, current iron ore prices look overbought, Commonwealth Bank of Australia said in a note.
‘We suspect iron prices will continue to ease in the coming weeks as restocking slows,’ the bank said.



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