Shanghai steel futures rose nearly 1 percent to near 10-week highs on Monday after robust Chinese exports data added to signs the world's No. 2 economy was stabilising.
That bodes well for consumption in the top global steel consumer and could spur traders to restock, although tighter cashflow and bank lending may limit the buying pace.
"The data is encouraging but the physical market especially for rebar is not that good and traders are finding it hard to sell," said a trader in China's eastern Shandong province.
"Cashflow is also tighter and it's difficult to get bank loans as the year-end nears."
The most-traded rebar for May delivery on the Shanghai Futures Exchange hit a session high of 3,726 yuan ($613) a tonne, before closing at 3,722 yuan, up 0.9 percent.
Consumption of rebar, or reinforcing bar, a steel product used in construction, slows during winter in China when building activities are curbed.
The price jumped to 3,727 yuan last Wednesday, the highest since Sept. 24, as firmer Chinese manufacturing data aided the demand outlook. Prices retreated over the following two days before rebounding on Monday.
China's exports jumped 12.7 percent in November, well above the forecast for a 7.1 percent increase, according to customs data released on Sunday.
Other data on Monday pointed to tame Chinese inflation last month, easing market concerns of imminent tightening in monetary policy as the economy gains momentum.
Iron ore for May delivery on the Dalian Commodity Exchange rose half a percent to 945 yuan per tonne.
China imported a record high 77.84 million tonnes of iron ore last month, up 14.8 percent from October, suggesting mills were replenishing inventories ahead of winter.
"China's commodity import demand remains robust, in line with seasonal factors such as the winter shutdown of domestic iron ore mining in the north of the country, and also in line with stable-to-modest economic growth and industrial output," Commonwealth Bank of Australia analyst Lachlan Shaw said in a note.
"We expect growth to continue at current moderate rates but acknowledge risks around slowing credit growth and inflation."
Imports by China, which buys at least 60 percent of the world's iron ore, are expected to rise to a record 850 million tonnes next year, an industry group said on Friday, justifying expansion plans by top miners such as Rio Tinto and BHP Billiton .
In the spot market, iron ore prices are unlikely to build on last week's gains, with buyers hesitant as prices neared $140 a tonne.
Benchmark 62-percent grade iron ore for immediate delivery in China's Tianjin port .IO62-CNI=SI slipped 0.2 percent to $139.20 a tonne on Friday, after rising to as high as $139.70 on Wednesday, its loftiest since mid-August, according to data compiled by Steel Index.
"We only have around 100,000 tonnes of ready stock, but we're not in a hurry to sell. We're keeping it for now because we're not sure about the market," said the Shandong-based trader.
China's average daily crude steel output fell in the last 10 days of November from the previous 10 days, declining nearly 2 percent to 2.091 million tonnes, industry data showed on Monday, amid slower demand.