Iron ore remained close to a four-month high following official data that showed record Chinese imports of the steelmaking ingredient.

Iron ore rose $0.20 to $139.40 a tonne after the Chinese government said it had imported a record 77.84m tonnes in November, up nearly 18 per cent on the same month a year ago.

Iron ore, the main commodity used in steelmaking, is seen as a proxy for industrial activity and construction in China, which imports more than half of the world’s seaborne trade.

The commodity is also critical for the profitability of large mining groups such BHP Billiton and Rio Tinto and the world’s top steelmakers, including ArcelorMittal and Baosteel.

Iron ore is on course to average around $125 a tonne this year, confounding analysts who expected increased supply from producers in Australia to depress prices.

BHP, Rio and Fortescue Metals Group have all increased output this year while Vale of Brazil recently outlined plans to increase production capacity from 306m tonnes to 450m over the next five years.

After touching a seven-month low of $110 in May, iron ore has rallied 26 per cent on the back of robust steel production in China, restocking by the country’s steel mills and rising confidence in the outlook for Chinese economic growth.

Chinese steel production hit a record annualised rate of 800m tonnes a year in May and has remained in the 760m-800m range since. To put that figure in perspective, annual production in 2012 was 717m tonnes.

Melinda Moore, an analyst at Standard Bank, said the fact that prices remained around $140 a tonne in the face of increased supply showed that Chinese demand for iron ore remained strong. “Prices remain high because demand remains high,” she added.

But with further supply growth forecast in 2014, many analysts are tipping lower prices over the next couple of years.

Citi estimates that global iron ore exports will exceed demand by 71m tonnes in 2014 and 93m tonnes the year after, as the three big Australian miners and Vale ramp up production.

It also expects Chinese steel production to moderate on a combination of slower macroeconomic growth rates and a transition from investment-led growth.

However, producers such as Vale say the threat of oversupply is exaggerated because more than one-third of the new supply will replace depletion at existing mines. They also expect Chinese demand to remain resilient and for prices to remain above $100 a tonne.

“The important message is that one does not need so much [Chinese] growth in order to keep a healthly environment for iron ore,” chief financial officer Luciano Siani said during a visit to London last week.

“We forecast seaborne iron ore market will grow at 3.6 per cent a year to the end of the decade and that is related a 2.6 per cent a year steel consumption growth. That’s the kind of growth we need for a healthy market,” he said.