Plentiful supply of iron ore may weigh on spot prices next week when Chinese mills return from a long holiday weekend, unless steel demand picks up pace.

Physical trading of iron ore was limited with top market China away for the Mid-Autumn Festival on Thursday and Friday.

Iron ore swaps steadied on Friday after steep gains in the previous session in line with risk assets globally after the U.S. Federal Reserve left its economic stimulus intact.

"We expect more supply availability from the big miners and that could drag iron ore prices lower. Chinese demand is stable but there's just far more material available in the market," said a Singapore-based trader.

Still banking on firm Chinese demand, global iron ore miners are forging ahead with expansion plans.

Rio Tinto loaded the first shipment of iron ore from its expanded annual capacity in Australia of 290 million tonnes earlier this month. The world's No. 2 producer is looking to lift output to 265 million tonnes this year from around 200 million tonnes in 2012.

Benchmark 62-percent grade iron ore was little changed at $131.80 a tonne on Thursday, according to data provider Steel Index. It is down 2 percent for the week so far, its third weekly decline in four.

The iron ore benchmark dropped as low as $131.10 on Tuesday, its weakest since Aug. 5.

A sustained decline in Chinese steel prices cut appetite for iron ore this month. Iron ore, the biggest revenue earner for Rio and other global miners such as Vale, has fallen 4.3 percent so far in September after a three-month climb.

Shanghai rebar futures fell for a seventh straight session to hit a seven-week low on Wednesday, just before the Chinese went on break, as steel demand looked slower during a typically strong consumption season.

"If we don't get the strong initial reaction from rebar or strong (spot iron ore) tender prices next week, then probably the swaps market will go back to levels pre-Fed announcement," said Jamie Pearce, head of iron ore broking at SSY Futures.

Iron ore swaps jumped on Thursday as commodities and equities rallied on the back of the Fed's decision to stick to its $85-billion a month in bond buys to aid the U.S. economy.

On Friday, swaps were little changed. The November swap contract traded at $128.25 a tonne, traders said, after gaining nearly $3 to settle at $128 in the prior session.