* Australian ports reopen after brief shutdown as storm passes * China HSBC flash PMI at two-year high * Shanghai rebar hits seven-month peak before falling (Adds Fortescue, updates rebar price) By Manolo Serapio Jr SINGAPORE, Jan 24 Spot iron ore prices rose to one-week highs as some Chinese steel mills continued to restock ahead of the Lunar New Year holiday, although buying interest was lean. Data showing activity in China's factory sector quickened to its fastest in two years should back further gains in iron ore, but steelmakers may only aggressively boost their inventories of the raw material again if steel demand picks up pace. The HSBC flash purchasing managers' index for China rose to 51.9 in January, the highest since January 2011, as manufacturers received more local and foreign orders. Shanghai steel rebar futures climbed to a seven-month high on Thursday after the data, but soon surrendered gains to finish lower. The most active rebar contract for May delivery on the Shanghai Futures Exchange ended down half a percent at 4,032 yuan ($650) a tonne, after rising to 4,067 yuan, its loftiest since June 26. Benchmark iron ore with 62 percent iron content .IO62-CNI=SI climbed 1.2 percent to $147.70 a tonne on Wednesday, according to Steel Index. It was the highest level since Jan. 15. "Some mills are still replenishing, they still want cargo, but they don't want the price to move up so much. That's why we are seeing limited deals," said an iron ore trader in Singapore. Price offers for imported iron ore in China, the world's biggest importer, were steady on Thursday. "We have not bought any new cargoes. We're still clearing all our stocks before Chinese New Year," said a trader in Shanghai, adding his company hopes to sell its remaining 40,000-50,000 tonnes of iron ore inventories at higher prices to recoup losses from previous cargoes. The reopening of Australian ports after a brief shutdown due to a tropical storm will ease worries about supply in the spot market, and could make this week's price gains fleeting. Iron ore hit a 15-month top of $158.50 a tonne on Jan. 8 in a rally that began in December as Chinese mills rebuilt stockpiles. The price fell more than 8 percent before regaining some ground this week. More iron ore restocking by Chinese steelmakers just ahead of the Lunar New Year holiday in mid-February could boost prices further, although a sustained rise will hinge on the strength of China's steel demand. China's steel demand is expected to rise 3.1 percent in 2013, 0.6 percentage points higher than last year as the economy recovers, the country's steel industry association said on Tuesday. Fortescue Metals Group the world's fourth-largest iron ore miner, increased shipments by 32 percent in the December quarter from a year ago to keep pace with demand from China, its biggest customer. "Steel mills are readjusting their raw material stocks to maintain more sustainable stock levels. With China's new leadership starting to rejuvenate programmes of economic growth and urbanization, steel demand is expected to increase and support iron ore prices," the company said. Shanghai rebar futures and iron ore indexes at 0710 GMT Contract Last Change Pct Change SHFE REBAR MAY3 4032 -21.00 -0.52 THE STEEL INDEX 62 PCT INDEX 147.7 +1.80 +1.23 METAL BULLETIN INDEX 148.99 +0.92 +0.62 Rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.2180 Chinese yuan) (Editing by Miral Fahmy)
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