Iron ore has extended its stunning year of price gains with a...

Iron ore has extended its stunning year of price gains with a new surge.

The spot price leapt $US12.06 or 7.3 per cent, to $US176.45 a tonne on Monday, according to Fastmarkets MB.

Dalian iron ore futures jumped nearly 10 per cent on Monday too. Iron ore on the Singapore Exchange climbed 8.7 per cent to record $US176.20 a tonne.

Iron ore on China's Dalian Commodity Exchange ended daytime trading up 9.7 per cent at 1144.50 yuan ($US174.76) a tonne on Monday, after earlier hitting a contract high of 1147 yuan.

In its December resources and energy update, released on Monday, the Deparment of Industry, Science, Energy and Resources said it expects iron ore to remain well above $US100 a tonne until mid-2021 before easing to just over $US75 by the end of 2022.

In December 2019, the department forecast prices would drop to $US57 a tonne in 2021. It revised that to $US70 in its March update, to $US79 by June and to more than $US100 through the fourth quarter of 2020 in September.

The department attributes the price strength to "a combination of production constraints in Brazil, ongoing stimulus-driven demand in China, and the relatively low price of metallurgical coal, which gives steelmakers added flexibility to pay more for iron ore.

"These factors are likely to persist for at least another six months."

The department also said it expects iron ore prices to be supported by recovery in the global economy, and a linked recovery in steel production outside of China.

"A substantial amount of steelmaking capacity remains shut down across much of the world, but many of these plants have retained their workforce and are capable of a rapid power-up should it become profitable for them to do so."

China's crude steel output is expected to top 1 billion tonnes for the first time in 2020, before rising another 1.4 per cent next year due to rapid economic growth and an increase in fixed-asset investment, a government consultancy said on Monday.

China, which produces more than half of the world's steel, is set to churn out 1.05 billion tonnes in 2020, up 5.4 per cent from a year earlier, and 1.065 billion tonnes in 2021, Li Xinchuang, chairman of the China Metallurgical Industry Planning and Research Institute (MPI) said.

Consumption for steel products, meanwhile, is set to rise 1 per cent to 991 million tonnes in 2021, after surging an expected 9.6 per cent this year, according to the government research body.