SHANGHAI: Dalian iron ore jumped to its highest in three weeks on Wednesday and was set for a weekly gain of more than 5%, buoyed by hopes of improved demand for the steelmaking ingredient after the Lunar New Year holiday in China.

Top steel producer China, home to the world’s most liquid iron ore futures market, heads into a week-long holiday beginning Thursday.

May iron ore on China’s Dalian Commodity Exchange rose 2.4% to 1,071.50 yuan ($166.43) a tonne by 0730 GMT, after earlier touching 1,072 yuan, advancing for a fifth straight session to the highest since Jan. 22.

March iron ore on the Singapore Exchange climbed 1.5% to $160.95 a tonne.

Despite thin pre-holiday trade, the SGX benchmark was also on track for a weekly gain of more than 5%, with a positive outlook for steel industries outside China providing a boost.

Spot iron ore bound for China traded at a two-week high of $161 a tonne on Tuesday, according to SteelHome consultancy.

Support is also intact from tight global supply that may persist this year, despite additional output expected from Brazil’s Vale.

“Supply increases from the low-cost majors will be restrained again,” said Justin Smirk, senior economist at Westpac Group in Australia, forecasting a deficit of around 27 million tonnes this year.

“Australian miners’ output is expected to lift only marginally, leaving the Brazilian giant, Vale, crucial to the overall recovery in supply,” Smirk said.—Reuters