Chinese iron ore futures rose on Wednesday, touching a fresh seven-week peak before coming off their highs, as steel prices stabilised after recent gains and high port stocks pointed to ample supply.

The outlook for short-term demand for iron ore in China, the biggest consumer, is bullish given the recent improvement in steel prices, said Marex Spectron analyst Hui Heng Tan.

But Tan warned that the supply of the steelmaking raw material remained high.

“Short-term iron ore supply continues to be bearish, with continued increases in implied supply and days of consumption,” Tan said in a note.

Inventory of imported iron ore at major Chinese ports stood at 101.5 million tonnes as of June 24, the most since December 2014, according to data tracked by SteelHome consultancy. <SH-TOT-IRONINV>

The most-traded September iron ore contract on the Dalian Commodity Exchange was up 1.1 percent at 420 yuan ($63) a tonne by 0213 GMT, but off a session high of 424.50 yuan, the strongest since May 9.

Iron ore prices benefited from stronger steel prices this week as low steel inventories in China pointed to firm underlying demand.

But Shanghai steel futures stabilised on Wednesday after hitting seven-week highs in the prior session. The most-active rebar on the Shanghai Futures Exchange was little changed at 2,264 yuan a tonne after rising as high as 2,288 yuan on Tuesday.

Following the Beijing’s vow to curb excess steel production capacity, China’s Yunnan province said it plans to cut its crude steel capacity by more than 4.53 million tonnes by 2018.

The southern China province also said that it would limit capacity to a maximum of 25 million tonnes by 2018.

• [Editor:tianyawei]