The spot price for seaborne iron ore rose in light trade on Friday ahead of the Christmas break, while steel and iron ore futures in China headed south.

As futures retreated this week, the price of iron ore for delivery to China's Qingdao port fluctuated. On Friday it rose $US1.99, or 2.6 per cent, to $US78.14 a tonne, rebounding from the previous day's 3.8 per cent slump, according to Metal Bulletin.

Both the spot price and the futures prices remain well on track to post massive annual gains after this year's searing rally.

Friday's weakness reflected an easing in demand for steel, with construction activities slowing with winter.

Authorities in the city of Tangshan in China's top steelmaking province of Hebei have lifted production restrictions on steel mills, a Shanghai-based trader said, as skies have cleared after thick smog was suspended in the air for several days this week.

That could lift steel output at a time when traders' appetite has waned.

After a restocking binge that lifted prices of both steel and iron ore, "steel traders have become reluctant to taking more cargoes because end-user demand is not that strong and they also have enough inventory", said the Shanghai trader.

The most-active rebar on the Shanghai Futures Exchange closed down 4.1 per cent at 2984 yuan ($US429) a tonne.

The construction steel product touched a 32-month peak last week and has gained 68 per cent so far this year, spurred by Beijing's campaign to slim its bloated steel sector and efforts to stimulate its economy.

Iron ore on the Dalian Commodity Exchange slipped 1.8 per cent to 548.50 yuan a tonne. But it has surged 170 per cent this year having touched a nearly three-year high last week.

Spot iron ore touched a two-year high above $US80 a tonne at the same time that futures rallied, bringing this year's annual gain to 75 per cent so far. The annual gain follows a three-year decline and is on course to be the largest since Metal Bulletin began assessing prices in 2008.

While this year's spectacular rebound in iron ore prices has been a godsend for the world's biggest miners, it has not gone high enough for smaller, less-efficient producers that still have pits shuttered and equipment idle.

Demand for iron ore may remain mostly weak towards the Lunar New Year in late January, said the Shanghai trader.