Benchmark iron ore futures in China gained over 4% on Tuesday, clawing back losses as the market tried to narrow the spread between spot and futures prices, while Tangshan lifting a smog alert also fuelled sentiment.
The most-traded iron ore futures on the Dalian Commodity Exchange, for May delivery, rose 3.3% to 1,064 yuan ($163.74) per tonne as of 0330 GMT. As of Monday, the contract had fallen nearly 12% from March 4.
"Traders usually narrow basis between spot and futures prices ahead of delivery," said Tang Binghua, an analyst with Founder CIFCO Futures in Beijing.
"The fluctuation is normal after drops, but fundamentals for iron ore are not changed," Tang said, adding that China's steel output cut plan brings uncertainty to contracts in the second half of the year.
Meanwhile, top steelmaking city Tangshan lifted its second-level smog alert on Monday afternoon. Restrictions on steelmakers' production have not been totally eased yet, but Tang said he expects restocking demand at mills.
Spot prices of iron ore with 62% iron content for delivery to China plunged by $10 to $164 a tonne on Monday, according to SteelHome consultancy.
