China's iron ore futures advanced for a third straight session to a one-week high on Tuesday, as concerns over tight supply pushed spot prices of the steelmaking raw material further above $160 a tonne.

The most-traded iron ore for May delivery on the Dalian Commodity Exchange ended daytime trading higher by 4% at 1,039 yuan a tonne, after earlier hitting 1,043.50 yuan, its strongest since Dec. 29.

Iron ore's most-active February contract on the Singapore Exchange rose 1.2% $163.09 a tonne by 0716 GMT.

Fresh signs of continuing tightness in iron ore supply and an overall positive sentiment after the New Year holidays pushed spot prices in China to $166 a tonne on Monday, the highest since Dec. 24, according to SteelHome consultancy.

After a two-week rise, iron ore volumes dispatched from 19 ports and 16 mining companies in Australia and Brazil - the biggest suppliers to top steel producer China - declined over Dec. 28-Jan. 3 by over 1 million tonnes, or 4.3%, from the week before, Mysteel consultancy reported.

At the same time, portside iron ore inventory in China shrank to 126.75 million tonnes as of Dec. 31, down 4.1% from last year's peak of 132.15 million tonnes recorded on Nov. 13, SteelHome data showed.