Reuters reported that spot iron ore prices rose to 6 week highs and are on track to post their biggest weekly gain in six months as Chinese steel mills replenished run down inventories, although caution is rising after the sharp rally.

A spike in Shanghai rebar futures backed this week's strength in iron ore, with prices trading at fresh 6 week peaks on Friday and on track for their best weekly performance since December.

A Hong Kong based iron ore trader said that mills have had very lean inventories of iron ore in the past two months and some people think steel prices may have bottomed out. But iron ore may have reached a short-term peak for now. Prices have risen too fast and the market needs to digest the increase.

According to data provider Steel Index, Benchmark 62% grade iron ore .IO62-CNI=SI rose 1.2% to USD 122 per tonne on Thursday, its highest since May 23.

The Steel Index said that in China, many traders are now holding on to cargoes on expectation of higher prices. Iron ore, China's top commodity import by volume, is up 4.7% so far this week, its biggest such gain since early January.

The gains in both iron ore and Chinese steel prices came after steep losses in the first half of the year that pushed prices to levels palatable for buyers. Iron ore dropped about a fifth in January to June and Shanghai rebar futures fell 15%.