Asia's benchmark iron ore futures rose on Wednesday as record steel prices in China prompted investors to make tentative bets, despite production cuts in the country's steelmaking hub that have clouded the demand outlook for the raw material.

The most-traded September iron ore on China's Dalian Commodity Exchange was up 2% at 996.50 yuan ($152.35) a tonne by 0330 GMT, after swinging wildly during morning trade.

Iron ore's front-month May contract on the Singapore Exchange advanced 1% to $163.30 a tonne.

Spot iron ore from top supplier Australia for delivery to China traded at $168.50 a tonne on Tuesday, according to SteelHome consultancy.

Chinese steel futures extended their rally in early trade to hit fresh peaks, boosted by strong domestic demand and concerns over output curbs in the world's biggest producer and exporter of the construction and manufacturing material.

In China's top steelmaking city of Tangshan, the government has downgraded several mills in the wake of a clampdown on the industry's heavy polluters, thus reducing their production capacities.

Construction steel rebar on the Shanghai Futures Exchange jumped as much as 5,208 yuan a tonne, the loftiest on record or since 2011 when rebar contracts began trading in Shanghai. It ended the morning trade down 0.3% at 5,156 yuan.

"Chinese government restrictions continue to be supportive for prices," ING commodity strategists said in a note.

"Steel mills in (Tangshan) would need to make specific data related to production parameters and pollution available on a government platform by month-end."

Hot-rolled coil, which is steel used in car bodies and home appliances, climbed 0.7% to 5,600 yuan a tonne, after earlier touching 5,674 yuan, its highest since trading began in 2014.

Shanghai stainless steel was flat at 14,375 yuan a tonne.

Dalian coking coal slipped 0.6% while coke advanced 0.5%.