Iron ore has recovered more than 12 per cent since falling to a 17-month low of $US104.70 a tonne in early March, but further gains depend on whether Chinese steel demand picks up even more during the seasonally strong month of April and May.
Stocks of steel products held by traders in China have been dropping over the past four weeks. The inventory fell to 19.27 million tonnes last week from 19.73 million tonnes the previous week, according to data from industry consultancy Mysteel.
"Demand for steel products is getting better so mills have money to buy cargo and not rely on banks given the tight credit conditions," said an iron ore trader in China's eastern Shandong province.
"But I think the cost of the raw material is increasing faster than steel prices so I'm not sure if the gains will be sustained," the trader said.
