By Manolo Serapio Jr

SINGAPORE, Feb 5 (Reuters) - Spot iron ore prices rose to

three-week highs as traders and Chinese steel mills stocked up

ahead of next week's Lunar New Year holiday, although the upward

momentum may lose steam as market activity winds down.

Price offers for imported iron ore cargoes in China

increased by a dollar per tonne on Tuesday, but deals have been

few.

'There aren't many buyers in the market right now, most of

them are already in a holiday mood,' a Shanghai-based physical

iron ore trader said. 'But we expect a strong opening for the

market after the holiday.'

Hopes that steel demand in China, the world's biggest

consumer and producer, will perk up after the Feb. 11-15 Spring

Festival pushed up steel prices to nine-month highs on Monday,

supporting appetite from producers for raw material iron ore.

Benchmark iron ore with 62 percent iron content rose 0.7 percent to $154.20 a tonne on Monday,

according to data provider Steel Index.

That was the highest price for iron ore since Jan. 14, and

just about $4 away from its 2013 peak, although traders and

analysts were unsure whether it can match or top that level as

early as this week.

'With Chinese New Year approaching, last week's panic buying

of ore is beginning to recede, although we believe that both

iron ore and steel warehouse stocks in China will require

further replenishing ahead of the March construction season,'

Standard Bank said in a note.

Apart from the seasonal boost, the Chinese economy is also

regaining momentum after seven quarters of slower growth as

evidenced by brisk manufacturing data for January, which bodes

well for steel demand.

But Shanghai steel futures eased on Tuesday after hitting

nine-month highs on Monday, while spot steel prices in China

were mostly steady.

The most actively traded May rebar contract on the Shanghai

Futures Exchange was down 0.4 percent at 4,183 yuan

($670) a tonne by the midday break. Rebar, used in construction,

hit an intraday high of 4,235 yuan on Monday, its loftiest since

May 2, 2012.

The iron ore swaps market was similarly subdued, with early

deals pointing to lower prices after recent steep gains.

The Singapore Exchange-cleared February contract

traded at $154 a tonne, after settling at $155.50 on Monday,

brokers said. The March contract slipped to $149 from

$153.33, they said.

Market participants seem to be taking stock of the situation

after recent gains and ahead of the long holiday in China, said

Jamie Pearce, head of iron ore broking at SSY Futures.

'Physical market has been fairly quiet. I think some traders

are holding out to post-Chinese New Year to make the next move,'

Pearce said.

Volume cleared by the SGX, the world's top clearer of iron

ore swaps, fell to 757,500 tonnes on Monday from 1.575 million

tonnes on Friday, which was the highest single-day volume since

early September, based on data from the exchange's website.

Shanghai rebar futures and iron ore indexes at 0405 GMT

Contract Last Change Pct Change

SHFE REBAR MAY3 4183 -18.00 -0.43

THE STEEL INDEX 62 PCT INDEX 154.2 +1.00 +0.65

METAL BULLETIN INDEX 154.79 +1.45 +0.95

Rebar in yuan/tonne

Index in dollars/tonne, show close for the previous trading day

($1 = 6.2328 Chinese yuan)

(Editing by Himani Sarkar)

Keywords: MARKETS IRONORE/

(manolo.serapio@thomsonreuters.com)(+65 6870 3884)(Reuters Messaging: manolo.serapio.thomsonreuters.com@reuters.net)

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