Shanghai steel rebar futures edged up as equities firmed on Thursday, but gains were limited as slow demand kept traders from building inventories.
The most-traded rebar for May delivery on the Shanghai Futures Exchange was up half a percent at 3,673 yuan ($603) a tonne by 0321 GMT, tracking gains in Chinese equities.
"We're not seeing signs that traders are building up steel inventories at this point because the demand outlook is still bleak," said Zhou Ting, an analyst at Jinrui Futures in Shenzhen.
Traders may start restocking next month ahead of a spike in demand typically seen ahead of and after the Chinese New Year in late January, but Zhou said the pace may be not as aggressive as in previous years.
Stocks of five major steel products held by traders in China stood at 13.36 million tonnes as of Nov. 22, down slightly from 13.51 million tonnes the previous week, according to industry consultancy Mysteel.
Inventory of rebar, a construction steel product, dipped to 5.14 million tonnes from 5.26 million tonnes.
But total steel stocks among producers rose 7.8 percent to 13.93 million tonnes at around the same time, based on figures from the China Iron and Steel Association (CISA), which Zhou said suggested traders were not keen on replenishing their slow-moving stocks.
Excess supply of steel has weighed on prices and thinned profit margins of producers in China, the world's top consumer and producer.
Daily crude steel output in the country remained high at 2.1319 million tonnes on average in mid-November, down less than 1 percent from the first 10 days of the month, according to estimates from CISA.
The latest production pace puts annualised output at 778 million tonnes, up almost 9 percent from last year.
Brisk steel production should continue to support spot iron ore prices which have held up above $135 a tonne this month, although ample supplies have limited gains.
Iron ore for immediate delivery in China's Tianjin port .IO62-CNI=SI was up 10 cents at $136 a tonne on Wednesday, according to data provider Steel Index.
"With global iron ore production being ramped up, more low-cost iron ore is likely to be made available to the seaborne market, which in turn may well keep prices more rangebound around lower levels in the years ahead," Sucden Financial said in a note.
For 2014, Sucden said it was looking for iron ore prices to trade in a range of $95-$100 at the lower end and $130-$135 at the upper end.
At the Dalian Commodity Exchange, iron ore for May delivery was up 0.3 percent at 939 yuan a tonne.