Iron ore prices rose on Wednesday, as record steel prices in China prompted investors to make tentative bets, despite production cuts in the country’s steelmaking hub that have clouded the demand outlook for the raw material.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were changing hands for $173.63 a tonne, up 1.59% from the previous trade.
The most-traded September iron ore contract on China’s Dalian Commodity Exchange ended the daytime trading session 1.7% higher at 993.50 yuan ($151.94) a tonne.

Chinese steel futures extended their rally in early trade to hit fresh peaks, boosted by strong domestic demand and concerns over output curbs in the world’s biggest producer and exporter of the construction and manufacturing material.

In China’s top steelmaking city of Tangshan, the government has downgraded several mills in the wake of a clampdown on the industry’s heavy polluters, effectively curbing their operations.

“Chinese government restrictions continue to be supportive for prices,” ING commodity strategists told Reuters.