Swaps extend gains as investors bet on iron ore rebound

By Manolo Serapio Jr

SINGAPORE, Oct 4 (Reuters) - Prices for iron ore forward swaps rose on Thursday, extending gains from late last week, as buyers banked on expectations for a rebound in spot iron ore prices when top consumer China returns next week from a holiday.

Chinese steel mills are likely to pick up fresh iron ore cargoes to replenish inventories after the Oct. 1-5 National Day break, and investors are anticipating spot prices could gain based on the premium buyers are putting on swaps, traders said.

The November iron ore swap contract

traded at $111 a tonne, said a Hong Kong-based trader, up 2 percent from Wednesday's close of $108.75.

"The swaps market is firming quite a fair bit since the start of the week despite the Chinese being on holiday," the trader said. "Market participants are turning bullish about the market."

The November swap price is well above the benchmark 62-percent grade spot iron ore

of $104.20 a tonne where it stood for a sixth straight day on Wednesday, according to data provider Steel Index.

Further forward swap contracts

also rose. Volume cleared by the Singapore Exchange - which clears the bulk of cash-settled iron ore swaps traded globally - jumped to 322 lots, or 161,000 tonnes from 100 lots on Tuesday.

This week's volumes have been modest with China's holiday sidelining many traders. Last month, the amount of swaps cleared by the Singapore Exchange peaked at nearly 4,000 lots on a daily basis, based on exchange data.

Iron ore hit a three-year low of $86.70 last month and while prices have since recovered to stand above $100, they have struggled to push higher in the face of poor steel demand in China, the world's biggest consumer.

Elsewhere, a series of wildcat strikes in South Africa that began in its gold mines spread to the country's iron ore sector, hitting Kumba Iron Ore

, a unit of global miner Anglo American

and among the world's top 10 producers.

Kumba said the strike at its giant Sishen Mine in the Northern Cape involved only 300 employees and one area in the open cast mine, leaving most of the facility unaffected.

Iron ore indexes Last Change Pct Change PLATTS 62 PCT INDEX 107 +0.50 +0.47 THE STEEL INDEX 62 PCT INDEX 104.2 +0.00 +0.00 METAL BULLETIN INDEX 106.46 +0.00 +0.00

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

(Editing by Himani Sarkar)

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