Iron ore's most-active October contract on the Singapore Exchange was up 3.3% at $150.60 a tonne, as of 0354 GMT. The pullback of iron ore prices from record peaks scaled in May helped boost steel margins, which may have prompted Chinese mills to increase their production.
Daily crude steel production during Aug. 11-20 averaged 2.14 million tonnes, up 4.6% compared with the average volume in the first 10 days of the month, analysts said, citing a report from the China Iron & Steel Association.
Spot iron ore has fallen below $150 a tonne from a record peak above $230 in May, as Chinese demand had collapsed, partly due to the country's ongoing steel production controls.
But optimism around Chinese steel demand is providing some support to steel and iron ore prices.
"An acceleration in local government bonds is also stoking hopes of stronger steel demand in coming months," said ANZ senior commodity strategist Daniel Hynes, citing the more than 600 billion yuan worth of notes sold since last week by local authorities. He said the proceeds from these bond sales are typically used to fund infrastructure projects.
