Reuters reported that Chinese steel futures edged up on Monday, but gains were weak, as market participants remained concerned over high inventory levels and a tepid recovery in demand putting pressure on steelmaking raw material iron ore.

Stockpiles that are still high, and weak purchases from end users, have offset expectations that steel demand in the world's top consumer will pick up pace in the Q2, when construction activity could support steel prices.

Mr Qiu Yuecheng, an analyst with steel trading platform Xiben New Line Co Limited in Shanghai, said that "Steel demand typically improves a lot in the Q2, and a few steel mills are curbing output after prices fell too much in the past few months, so I would expect prices to rebound to some extent."

The most active rebar futures on the Shanghai Futures Exchange gained less than 1% to CNY 3,826 a tonne by the midday break, not far from the 2013 low of CNY 3,705 a tonne hit on April 2nd.

However, some traders remain worried that record high stocks held by steel mills suggest limited pickup in steel consumption and cashflow, which will curb any potential gains in steel prices and also weigh on iron ore.

An iron ore trader in Shanghai said that "Despite falling inventories held by traders, steel mills are facing record high stocks, which means steel consumption growth is still weak. I don't see any obvious signs that steel demand will improve significantly in the near term and any gains will be limited. Mills are still buying iron ore in a hand to mouth volume."

Industry data said that inventories of steel products at large Chinese producers surged to a record near 15 million tonnes by mid March.