Chinese steel and iron ore rebounded on demand

China's steel and iron ore prices rose this week amid expectations that many of the country's suspended construction projects will resume, with more to begin soon, boosting demand for commodities.

The most active steel rebar construction contract on the Shanghai Futures Exchange rose 2.5 percent to 3820 yuan ($ 568.88) a tonne before ending the session at 3815 yuan, the largest daily gain in four weeks.

Hot rolled coil ended 2.4 percent higher at 3,776 yuan per tonne.

“Steel prices should rise after we saw less production and expected growth in demand last week, especially at construction sites, because the weather is improving,” said analyst Richard Lu of CRU in Beijing.

“The demand for steel flat products is particularly strong right now, possibly due to some restocking as inventories have declined,” he said.

The benchmark rebar contract fell 10% after hitting a five-month high to close at 3,856 yuan on February 11, as a slowdown in China's economic growth amid a trade war with the United States clouded the outlook for steel demand.

The best-selling iron ore contract on the Dalian Commodity Exchange jumped 1.9 percent to 612.5 yuan a tonne.

Iron ore prices in Dalian have been volatile since hitting a record intraday high of 657.5 yuan a tonne on February 12, fueled by concerns over supply disruptions following the disaster at the Vale SA's upstream tailings dam in January.

High prices and restrictions on steel production in China, aimed at tackling air pollution, have recently led to a decrease in demand for iron ore, while inventories in Chinese ports continued to rise.

“It is the debate over the outlook for steel demand in China that is causing investors to be cautious,” ANZ said in a statement. "This puts a lot of emphasis on data later this week, including investment in fixed assets and industrial output."

The rise in iron ore production in Dalian on Tuesday also followed news that the city of Mangaratiba in the Brazilian state of Rio de Janeiro fined Vale and closed its Ilha da Guaiba port terminal for the second time this year.

According to the Brazilian port regulator, about 40 million tons of iron ore passes through the Vale terminal at Ilha da Guaiba every year. The terminal was ordered to close on Monday due to pollution concerns and an alleged lack of a license to operate.

Dalian coke fell sharply in five days to 0.7 percent at 2,005 yuan a tonne. However, coking coal extended its fall to seven straight sessions, down 0.3 percent to 1,228 yuan.