SHANGHAI, Jan 18 (Reuters) - Chinese iron ore futures surged 4 percent to their highest in a week on Monday, buoyed by expectations that demand in the world's top consumer could pick up in the first quarter and as the rainy season curbs supply from South America.
The most traded iron ore futures, for May, on the Dalian Commodity Exchange DCIOcv1 climbed more than 4 percent to a session peak of 321.5 yuan ($48.87) a tonne, the highest since Jan. 7. That was the biggest daily rise in more than four months.
The contract was trading up 3.9 percent at 320 yuan a tonne by the midday break, after dropping for the past two weeks to near its lowest level since at least 2008.
"The first-quarter market outlook is not as pessimistic as before. Steel inventories are low and mills' profitability is improving, while shipment of iron ore from Brazil is dropping because of rains," said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen.
"However, the gains are not solid yet and prices are likely to fall again before the Chinese New Year holiday."
The Lunar New Year will fall in early February.
Iron ore for delivery to China's Tianjin port .IO62-CNI=SI gained 1.5 percent to $40.20 a tonne on Friday, according to The Steel Index (TSI).
The most active rebar contract on the Shanghai Futures Exchange SRBcv1 had surged 2.9 percent to 1,826 yuan a tonne by midday break, after touching a session high of 1,832 yuan a tonne, their highest since Jan.4.
Rebar and iron ore prices at 0334 GMT
Contract
Last
Change Pct Change
SHFE REBAR MAY6
1826
+52.00
+2.93
DALIAN IRON ORE DCE DCIO MAY6
320
+12.00
+3.90
SGX IRON ORE FUTURES FEB
41.88
+2.72
+6.95
THE STEEL INDEX 62 PCT INDEX
40.2
+0.60
+1.52
METAL BULLETIN INDEX
41.12
+0.90
+2.24
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.5790 Chinese yuan renminbi)