BEIJING (Commodity Online): Iron ore prices in China import market rebounded on Wednesday after cargoes from Australia were sold at comparatively higher prices. However, analysts expect weak trends in iron prices to continue on lack of demand from steel industry which in turn reflects on the growth of infrastructure in China.

Spot iron ore and steel prices are down more than 2% while Rio Tinto managed to sell 61.5% Fe content ironor at $137 per ton for one cargo as against $133 quoted in China markets on Monday.

Benchmark iron ore with 62-percent iron content .IO62-CNI=SI climbed 1.4 percent to $135.40 per tonne on Tuesday, according to the Steel Index, recovering from a three-week trough hit the previous day, Reuters reported.

Recently, a few analysts referring to data from China pointed out that loans for infrastructure has seen a quantum jump in 2012. However, Oscar Tarneberg, Senior Iron Ore Analyst at The Steel Index (TSI) said that stagnant steel prices are eating into margins of the industry and hence weak demand for iron ore.

” Some analysts have suggested that China may be lagging behind its 2012 targets for infrastructure spending so far, implying there is room for a “splurge” on new projects in the second half of 2012. The impact of any such increase in infrastructure spending on iron ore prices will depend on how it feeds steel demand and prices. Currently steel output is high, but demand is not keeping pace. As a result stagnant steel prices are eating into mills’ margins. This has been one of the major limiting factors for iron ore prices this year,“ Oscar Tarneberg responding to an email questionnaire said.

Meanwhile, the recent upward movement in Baltic Dry Index was attributed to increased movement of coal and iron ore from Australia and Brazil region to Asian nations suggesting a revival of steel sector in Asian region. However, Oscar Tarneberg of TSI said that no clear rebound in steel markets was visible so far:

“We have not heard of any real changes in the outlook for the steel market in Asia. Much in the region depends on what happens in China, and, as outlined above, this is as yet uncertain. With a leadership change due at some point this year, the authorities will be looking to support growth, or at best avoid any sort of hard landing. Potential growth-supportive policy measures to look out for, which could firm up steel demand in coming months, include a cut to the reserve requirement ratio for the country’s top lenders. Typically this has in the past released liquidity into the economy which has resulted in increased investment in steel-intensive infrastructure and real estate.”