Reuters reported that spot iron ore prices jumped for a fourth straight day to a three week high as traders increased buying to lift the market, while weak restocking by Chinese steelmakers and tepid steel consumption are expected to cap the rally for the raw material.

The increasing supply glut in China would keep denting steel prices that previously hit 9 month lows, although strong production means that high appetite for iron ore could support prices against a steep fall.

An iron ore trader in Beijing said that steel mills are not piling up stocks but preferring to buy a hand to mouth volume from existing inventories at ports. It's traders picking up cargoes as they are keen to push up prices. But the rise is too fast while demand is not strong enough to catch up, so iron ore prices are likely to retreat as long as there is no explosive restocking from mills.

According to information provider the Steel Index, Benchmark 62% grade iron ore index .IO62-CNI=SI stretched gains by USD 2.7 or 1.8% to USD 117.7 per tonne the highest since May 28. A weak consumption season, as the hot summer weather would slow down construction activities, the key consumer for rebar is also pressuring steel prices.

Mr Peter Cho an iron ore swap broker with ICAP in Singapore said that "Firmer steel prices are encouraging bullish sentiment among iron ore traders, but slower consumption season and high steel supply will restrain gains in iron ore prices."